Financial encyclopedia

The correlation between oil and gold, the dollar, and the stock market

Gold hit a new high, oil prices are also rising, crude oil and the US dollar, gold, the stock market, which seems to have little correlation, but its internal but inextricably linked.

The stock market is positively correlated with oil prices
When a falling stock market is a sign of a bad economy, a bad economy means less demand for ️ oil. When there are fewer people to buy crude oil and supply exceeds demand, the price of oil will naturally fall, and vice versa.

The dollar has an inverse correlation with crude oil
In addition to the oil price denominated in US dollars, the United States itself is the world's largest demand for crude oil ️ inflationary pressure brought by rising crude oil prices will bring depreciation pressure on the US dollar, and the direct result of the depreciation of the US dollar is that the price of crude oil denominated in US dollars will also rise.

On the contrary, lower oil prices are a good sign for the economy. Confidence in the American economy will push up the value of the dollar, causing oil prices to fall further.

Gold is positively correlated with crude oil
️ The rising oil price means that inflation will follow and the uncertainty of economic development will increase. However, gold is a hedge against inflation. At this time, the role of gold as a hedge against inflation will be favored by people. So when oil goes up, gold goes up. When oil goes down, gold goes down.