NEW YORK (MainStreet) — As prices for both crude oil and gold have declined recently, the regular correlation between the two commodities appears to be ending, according to precious metals experts.
While gold and crude oil prices have had a strong relationship in the past, the recent massive drop in oil has broken that correlation, said Scott Carter, CEO of Lear Capital, a Los Angeles precious metals firm which sells physical gold, silver and palladium to retail investors.
Crude oil’s rapid decline occurred because of the “severe” economic slowdown occurring in Europe, China, Japan and Russia, which are fighting deflation, he said. Central bankers in those countries have turned to printing more fiat currency or money that is not backed by gold or other currencies to fight deflation.
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Gold investors view this as a “predictable response” from the central banks and are maintaining their gold and silver positions, Carter said.
“If the Central Banks of Europe, Russia, China, Japan, and the U.S. continue to keep interest rates at zero and also begin to print fiat currencies to spark their respective economies, then gold and silver should appreciate materially,” he said. “If the printing presses start up in every major country, gold will increase by 15% to 20% in 2015.”
The correlation between gold and oil is really more of a function of the