Monday, September 5, 2016

Oil Could Lead Gold Higher, But We Still Need To Watch The Fed

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*There is a chance oil goes on a run with an OPEC consensus.
*Oil and gold have traded leadership over time.
*Both are inflationary and can feed on each other.



OPEC nations meet in Algiers September 26-28. They are trying to organize a production freeze. Russia and Saudi Arabia just inked an agreement to steady the oil (NYSEARCA:USO) market. Oil and gold (NYSEARCA:GLD) have traded performance leadership positions over the long term. Oil may lead gold up from here. That said, we need to see what the Fed wants to do September 21st.
OPEC Nations Meet September 26-28th
OPEC nations have organized to meet in Algiers at the International Energy Forum.
Russia and Saudi Arabia just agreed to cooperate to steady oil prices.
Many oil producing nations have been suffering after oil dropped from $130 per barrel to $30. Now when oil drops into the low $40s OPEC members call for a meeting to agree on production limits.
The freshly inked deal between Russia and Saudi Arabia is one of many steps to align OPEC nations of late.
Iran recently said they would agree to production freezes after they reached their pre-sanction production rates. Iran didn't agree earlier in the year. That held Saudi Arabia from agreeing.
With Iran, Saudi Arabia and Russia aligned there is more visibility of a production freeze. Keep in mind also that Russia and Iran have been allies in the Syrian war. Iran and Saudi Arabia have been fighting each other in Yemen and Syria. Even though Russia is not an OPEC member they may be an important bridge to have OPEC agree.
Oil And Gold Have Moved Together.
Gold and oil are two of the most heavily traded commodities. It makes sense that they move together. They are both inflationary. They both tend to move inversely from the strength of the dollar. For these reasons, if oil goes on another run, gold could go up as well.
Here's the chart comparing oil and gold longer term.





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