Gold and oil are valued in dollars, and correlation is often sought with a weak or strong dollar. On the other hand, the two commodities usually have a backward correlation, as oil is a risky asset and a gold safe heaven. If we look at the graphs, however, we will see that the correlation is in the opposite direction since December.
Obviously, this feedback between the two assets will not have a sufficiently logical explanation. It is interesting that such a formation was in the period December 2017 - May 2018. Whether the scenario will repeat itself and is now the question that traders and investors will ask themselves.
Oil did not make a decent correction of its latest upward movement, while in gold we can expect H & S formation to likely lead to decline in the price of the precious metal.
If the correlation is exhausted and given Wall Street's increased optimism, we can expect even more expensive oil and cheaper gold by the end of 2019.
Chart: Used with permission of Bloomberg Finance L.P.
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