Dollar weakness supporting Gold and Oil

Gold climbed to an all-time high as investors stepped up purchases of the precious metal on speculation that the dollar will extend a decline.

The weakening greenback sent gold prices higher, rising to a record and extending 7.5% gain this month, as demand increased for the precious metal as a store of value. The metal, set for a ninth annual gain and 28% higher this year.

“Investors of all levels from retail investors to central banks are really diversifying their portfolios,” said Toby Hassall, an analyst with CWA Global Markets Pty Ltd. in Sydney.

“We could see gold head up towards $1,150 before the end of this year, largely a consequence of further weakness in the dollar.”

Oil prices rose above $77 a barrel Monday, helped by a weaker U.S. dollar and forecasts indicating global crude demand will improve next year.

Oil “has been a trade based on the recovery story and that hasn’t changed,” said Toby. “The weakness in the U.S. dollar should remain a pretty supportive factor.”

“Even with the dollar near 15-month lows there is still more room to the downside and crude has more room to the upside,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “As long as Asia is doing well and Europe and the U.S. aren’t doing terribly, the risk trade is going to continue and that will push crude up and the dollar down.”

The Organization of Petroleum Exporting Countries (OPEC) - producer of more than 40% of the world’s crude oil - won’t increase its output quotas when it meets in December, Qatar’s Energy Minister Abdullah Bin Hamad Al-Attiyah told.

Crude has gained 73% this year and reached a 12-month high of $82 on Oct. 21.

 The above chart shows the performance of Gold & Crude Oil. Both have returned closed to 28% since the start of this year. 

Article  written, based on data from Bloomberg.