Declining U.S. dollar is bullish for oil price - Dec 28

[dan_s]

U.S. Dollar has been falling for several months. Take a look at the YTD chart here: https://www.marketwatch.com/investing/index/dxy

Most oil trades in U.S. dollars, so a weaker dollar means more dollars are required to buy a barrel of oil in the global oil market.

Also, Oil and Gold prices have a historical relationship of 20 to 1; meaning that one ounce of gold should buy ~20 barrels of oil. So, at today's gold price Brent should be selling for ~$104/bbl.

Gold prices are ending a big year on an up note, ripping to another record this week as Treasury yields and the dollar extend declines on expectations the Federal Reserve will soon be cutting interest rates.

Gold for February delivery GCG24, -0.25% closed at $2,093.10 an ounce on Comex Wednesday, the highest finish on record for a most actively traded contract GC00, -0.26%, according to FactSet. February gold was off $8, or 0.4%, at $2,085.10 an ounce early Thursday. December gold expired Wednesday at $2081.90 an ounce, a record for the front-month contract, according to Dow Jones Market Data.

Gold is up more than 14% so far this year, based on the most actively traded contract. The yellow metal has yet, however, to take out an intraday high above $2,150 an ounce set when gold briefly spiked to the upside early this month.
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The correlation between gold and oil is positive and influenced by inflation and the US dollar.
> Gold and oil are both dollar-denominated assets, meaning they tend to move in the opposite direction of the US dollar.
> Gold and oil also have an inflationary relationship, meaning they both tend to rise when inflation rises.
> Gold is considered a hedge against inflation, while oil is a major driver of inflation.
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During 2023 the FEAR of the Fed and FEAR of Recession have kept downward pressure on oil prices.