A five-year-long link between crude oil and gold has come apart as the economic recovery boosts energy consumption and lowers the metal’s appeal as a haven, encouraging investors to buy oil and sell gold.
The 120-day correlation between West Texas Intermediate crude and gold futures slipped into negative territory this year for the first time since July 2009, according to data compiled by Bloomberg. The relationship tightened, though remained negative, last week as military tension in Iraq boosted prices for both commodities.
Crude and gold moved in tandem for a half decade as investors sought to diversify into commodities from equities and bonds. U.S. economic growth is boosting expectations that fuel demand will rise, while gold is losing its allure as an alternative to the dollar, with the Federal Reserve signaling tighter monetary policy. Gold will be the worst-performing commodity in the next 12 months, forecast 71 percent of investors polled by Credit Suisse in May, while 49 percent said crude has the best outlook.