The “Black Gold”/Gold Gold Connection: Rocketing Prices Show Global Uncertainty

Spend Matters is pleased to present a guest post from Nick Peksa of Mintec Ltd.

Gold has been the most sensitive barometer imaginable to inflation, throughout all of human history. Gold always announces currency problems in advance by rising dramatically in value. Gold is often bought up as a safe option for investors facing great uncertainty in the stock markets. One such market that has faced a lot of uncertainly in the last couple of years has been black gold: also known as crude oil.

It is normally in the best interest of OPEC to increase production capacity of oil as global demand increases, however due to various political events in the Middle East the balance has not been kept in equilibrium. This imbalance has led to rocketing oil and gold prices which has also affected a lot of other industries in varying degrees.

If crude oil continues to increase, this could indirectly affect all of us -- as gold's properties make it an extremely valuable commodity in a lot of modern technologies. It is a superb electrical conductor, it is highly reflective and resistance to corrosion and it is also biologically inactive. We use it every day in computer components (wires and semiconductors), television cables, telephones, medical lasers and even gold tooth fillings. Whilst it appears to be only used in small amounts, consider that millions of computers, telephone and televisions are manufactured each year. Milligrams soon become kilograms which soon become tonnes.

Other economic headlines

  • Prices for most food commodities moderated responding to slower demand worldwide.
  • Deepening sovereign debt crisis in the Eurozone and the US led to lower expectations for global economic outlook. Business and consumer confidence has deteriorated across the markets.
  • Major emerging economies are expected to expand at a slower rate, but sufficiently to sustain global economic growth. The Chinese economy is projected to expand by 8.5% in 2012, down from 9.3% this year. Growth in India is expected to decline from 9.9% to 7.7% next year.
  • World trade has stagnated with the CPB index -- a monthly index on world trade used by the World Bank and OECD -- moving within a limited range in recent months.

Just to put into perspective how much gold is currently in circulation in the world, if we were to melt down all gold jewellery and statues and fillings, we would only actually fill up one Olympic size swimming pool. I guess we all need to keep a closer watch on what is happening in the world and hide our gold!

- Nick Peksa, Mintec Ltd.

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