When investors feel uncertain about the economy they always run to gold, diamonds or hard "real" commodities.
Thus, as the price of oil has declined, to record lows, we see people seeking gold, silver and diamonds and the price of gold has made a larger increase in price in the last few days, than in some time, reversing what seemed a bottomless stair-step down. When world economies appeared to be in economic recovery the price of gold declined. Now that uncertainty is in the air, gold is moving up.
The hopes of most oil producing nations was that the decades low price for oil of recent weeks would simply be a temporary event. But, recent statements out of Saudi Arabia suggest that Saudi Arabia is intent on "regaining market share" even if it means putting much of the fracking and oil drilling industry in the USA and around the world, out of business.
That makes people feel nervous, and many then invest in gold, the investment of uncertainty.
$130 dollar oil to $47 oil is a major hit to the balance sheets and economies of places that produce oil and deeply hinders new petroleum development and drilling. But the producers of oil, are still pumping, regardless of the low price, and this is hurting Russia to the tune of $2 Billion per day, Iran $1 billion per day, and smaller oil producing nations such as Ecuador or Mexico feel the pinch to their national budgets.
Many believe this will cause economic recession in some areas of the world, and especially in regions where oil is the "big" business. Also the low price of oil, stigmatizes development of renewable energy, solar power, wind power, hydrogen vehicles, electric vehicles, and massive efforts which have been working to lower our "carbon emissions impact" on the global environment. Thus a low oil price has it's winners and losers. Sargent Hussein, an expert in the hotel business indicated that net ADR in the hotel business, especially in oil and gas producing states would decline. Also, that hiring in oil and gas has been put on hold, especially for new drilling. But he believes that the decline in the price of oil is a short term event, that will soon reverse itself. No doubt, a single terrorist event in a large refinery, or a natural disaster could impact oil production levels. But, Hussein believes that even though new drilling may slow down or stop in Texas, North Dakota, Oklahoma and other oil producing areas, that the economic impact of low gas prices may increase economies in non oil producing states. Thus, he believes that the economies of say, Albuquerque, New Mexico, Chicago, Illinois, Miami, Florida, San Francisco, California, will actually benefit, and his "hotel" industry will continue to thrive.
1. Areas that do not produce, drill or refine oil and gas producers.
2. Consumers, who instantly see a "tank of gas" cost $30 instead of $70 dollars.
3. Travel industries such as airlines, trucking, distributors
4. Farmers who use much fuel to grow, irrigate and process food
5. City, State and National departments of vehicles, trucks and equipment
6. Hotel and resorts may benefit from increased auto traffic and vacation traffic
7. The U.S. dollar value
8. Industries that require huge energy resources
9. People who own gold and see it's price going up.
10. Nations such as China, India, the Korea's which import oil and find the low prices helpful.
11. Gold mining, gold producers, gold distributors and regions that have undeveloped gold.
12. Nations with large gold reserves or currencies backed by gold.
1. Regional economies where oil is drilled, refined, or produced
2. Nations such as Iran, Russia and others that depend upon oil exports to balance their national budgets
3. Stockholders and investors in the oil industry
4. New developers of energy efficient equipment, vehicles, buildings
5. Nations that export oil or gas (the USA) improving the balance of payments (in recent years the USA has actually exported more oil and natural gas than it
has used due to Fracking Technology)
6. The value of the Ruble, in Russia or currencies in nations that normally export oil such as Iran.
7. The coal mining industry
8. Investors who sold gold, thinking the economies of the world were stable.
9. Nations that do not have gold reserves, or currencies backed by gold.
As the chart above shows, the price of gold zoomed up during 2009,2010, 2013 because of the worst economic recession in 40 years. As the economy entered into recovery, the price of gold dropped
because investors felt comfortable taking money out of gold and investing in real estate, stocks, companies and other investments. But, now, with oil prices at dreadful lows, many investors fear change
and recession. Most people do not realize how significant oil and gas revenues have been to the world economy, and there is not a clear signal from Saudi Arabia as to how long they wish to produce
at full levels. Others fear that the egocentric leadership of Putin's Russia could lead to war or conflict, because Russia's foreign exchange reserves are dropping daily at huge rates. A Russia on the rocks
would eliminate funds for military action and destabilize it's population. Some say probabilities of military conflicts involving Russia are higher than we have seen in some time. Another nation that is
unpredictable is Iran.
Thus, we see gold prices moving upward. As uncertainty goes up, so will the price of gold.