The inverse correlation between crude oil prices and gold is playing
out to the core recently. While crude oil slumped heavily over the last
20 days, the opposite has happened with gold. From breaking down the
41,100 mark in late July, the yellow metal has recovered significantly
and breached the $1,150 mark after more than a month.
Bob Alderman, head of wealth management at Gold Bullion International,
was on CNBC Thursday to discuss what is driving gold's rally.
Fed Comments
"We think there are three drivers that are in the market right now:
the Fed, China – and I'll also couple in other emerging market
currencies with China in terms of currency devaluation – and short
covering," Alderman began. "I think, as far as the Fed goes, the dovish
comments yesterday certainly led many to believe that there will be no
rate change until at least December."
China And Emerging Market Currencies
He continued, "As far as China goes and, I think, it's very
important...to also add in that there are other countries and other
emerging market countries that have suffered far greater currency
devaluations that China has, although China is the one we point to."
Short Covering
"And then short covering, I think, what's happened over the last week
or two is with so few contracts being long, short positions topped out
at about 159,000 a couple of weeks ago. I think these shorts are
providing fuel to exaggerate upside moves as they run for cover,"
Alderman concluded.
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