Volatility in Gold Reaches Nine Month High

Oil is making gold investors cross-eyed.  Because gold traders often track the cost of oil, which can impact consumer costs and inflation, a whipsaw in crude futures is spurring the biggest price swings for bullion in almost nine months. Adding to the pain for investors in the metal is a dollar rally that’s curbing demand for alternative assets.

While gold dropped to a four-year low last month as investors saw less need for a store of value, prices surged on Dec. 1 by the most in 14 months when oil rebounded from a five-year low. Both commodities resumed declines yesterday. U.S. inflation expectations, measured by the five-year Treasury break-even rate, fell 24 percent this year, set for the biggest decline since 2008.

“Gold has been swinging along with oil prices in the past few sessions,” Atul Lele, who helps oversee $5.1 billion as the chief investment officer at Bahamas-based Deltec International Group, said yesterday in a telephone interview. “There are far too many negative factors pushing gold down, and the volatility that we saw because of oil will not lead to any upside in prices.”

Bloomberg

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