Photo: Reuters
Investing.com - It’s a tale of two commodities, and the divergence couldn’t be more startling.
Oil is in a bull market, up nearly 30% from a low hit four weeks ago, with crude prices looking like they could reach $50 a barrel soon.
Back in April, one couldn’t have even imagined something like this happening before the end of the year.
Then, U.S. crude was at minus $40 as the coronavirus pandemic induced a kind of gloom that virtually darkened all sorts of travel, be it by road, sea or air.
Gold, in contrast, has lost nearly 15% from its August record high and is now below $1,800 an ounce.
For the most ardent fans of the yellow metal, this would have been an unthinkable situation just a few months back, when $3,000 or more was being forecast for gold before the end of 2020 from a confluence of COVID-19-related stimulus spending and dollar weakness.
So, oil is being bought on the promise that the pandemic will be curbed over time, meaning a return to a life as we once knew it, that could result in more mobility and travel than now and, thus, more demand for oil.
Gold is being sold on the expectation that the recovering global economy will continue to ratchet up appetite for risk assets like stocks and oil, reducing the need for safe-havens.
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