Crude Oil’s Drop Was Foretold By Gold

Crude Oil Tends To Bottom 20 Months After Gold

February 13, 2020 Bob Weir McClellan Chart-In-Focus

eResearch | Gold has proven to be a successful leading indicator for the future price of crude oil. Tom McClellan states that changes in the price of gold tend to be mirrored in changes in the price of crude oil some 20 months later.

2020-02-13 Chart - Gold Futures compared with Crude Oil Futures — **Source: McClellan Financial Publications**

Despite the big drop in the price of crude oil in 2020, brought on by the increasing fear that the coronavirus will impact, not just China, but global economies, the timing of oil’s price-drop “still matches gold’s message”.

Of course, indicators do not always work in perfect unison. In this case, oil became somewhat dysfunctional in Q4/2018 but it got back in sync with gold in early 2019 and it has stayed that way ever since.

With gold bottoming in August 2018, 20 months hence means that oil should bottom in April 2020. However, with the coronavirus scare decimating the Energy Sector, the bottom for crude oil may already have occurred. But, using that 20-month benchmark, we will need to wait until April to confirm that this gold-oil relationship has performed as expected.

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Bob Weir has over 50 years of investment research and analytical experience in both the equity and fixed-income sectors, and in the commercial real estate industry. He joined eResearch in 2004 and was its President, CEO, and Managing Director, Research Services until December 2018. Prior to joining eResearch, Bob was at Dominion Bond Rating Service (DBRS).