Gold and oil: how crude oil can move the gold price

1. What the two have in common

Both are raw materials quoted in US dollars, so a move in the dollar touches both. Both also react to worries about growth, war and supply. That shared backdrop can make them move together for a while, and then they split. A chart of the two does not show a steady relationship, so avoid trading on the idea that one leads the other. See what moves the gold price.

2. The inflation route

Dearer oil raises the cost of transport and goods, and can push up inflation expectations. Gold is often bought as a hedge against inflation, so some traders expect it to benefit. Read gold and inflation for how the reports are watched. The effect depends on what people think the central bank will do next.

3. The interest rate route

If higher inflation makes the central bank keep rates high, or raise them, the cost of holding gold, which pays no interest, goes up and gold can fall. That is the opposite of the inflation story, which is why the same oil move can push gold either way. The rates side is in gold and interest rates, and the currency side in gold and the dollar index.

4. Using oil in practice

• Check oil on the same day as the economic calendar: big oil news often arrives with other events.
• Ask which route the market is watching, inflation or rates, before you guess a direction.
• Size the gold trade from your stop, as in how to calculate lot size for gold, whatever oil is doing.
• Oil symbols have different names at different brokers, so read the contract specification before you add a chart.

5. If you want a rule

A rule such as "buy gold when oil rises" must be written down with entry, exit, stop and size, then backtested in MT5 with the spread and swap charged, on data you did not use to build it. We have not tested oil as a gold rule, and no BaroqTech strategy has passed our judge yet, so this page is an explanation, not a method. Our gold numbers page shows how far gold usually moves in each hour of the day.

The Monthly Pass and the Lifetime Pass are software licences for your own MetaTrader account. They score every robot and strategy you run the same way, with costs inside every number. See the plans.

FAQ

An educational tool. It is not investment advice. Trading leveraged products such as gold CFDs carries a high risk of losing money, and you can lose all of it.

BaroqTech makes software. It is not investment advice and it does not manage money. Trading leveraged products such as gold CFDs carries a high risk of losing money, and you can lose all of it. Results from a test or from a demo account do not predict results on a real account.