Gold up on stronger oil

Thursday saw higher gold prices after an early surge in crude oil. As higher oil prices are considered inflationary, the price of gold has been getting stronger as a hedge against inflation. A price of $900 is considered a possibility by some analysts, even as early as next week if the oil continues to be strong. Even though oil has eased off a bit, there is still the talk about $150 for the barrel, which adds inflation fears and supports the price of gold.

According to the Financial Times, the price of gold may not rally until investors see evidence of higher inflation in the US. Increased price of oil will help to increase the inflationary pressure, which could help the gold to rally. Gold gained 26% last year on weaker dollar and higher oil prices, but lost some of the gain from the all time high of $1,038.60 reached in March this year.

Increased stocks in natural gas and the expiry date of the June crude oil contract, all increase the volatility of oil prices, which may have some effect on the price of gold.