Precious metals alongside oil are down second day in a row. Both silver and gold have been trading on par with oil for the past few months ever since the unrest in the Middle East started.
If oil continues to go down towards the 100$ level, we should see gold and silver trading lower also, on par with oil.
Of course, question is: Will this happen or not? Will oil continue to go down?
Well, it all depends on what happens in the Middle East and that seems to be pretty hard to predict as it involves dozens of factors. If Syria and other countries continue to face unrest and if contagion spreads to Saudi Arabia, oil will explode up towards the 150$ level and precious metals along with it. If things stabilize, we might see this downtrend continue.
Goldman Sachs chief analyst David Greely said in a April 12 note to his investors:
"While prices are back at levels of spring 2008, supply-demand fundamentals are significantly less tight. We believe that the market will experience a substantial correction toward our $105 a barrel near-term target for Brent crude oil in coming months. "
Now, if this prediction comes true, we should see stocks rally and some precious metals going lower as lower gas prices should assure people of a continued economic recovery.
Even if Goldman`s foresight is flawed, it will impact the market(at least short term), especially if Middle East stays unclear. Goldman has enough weight on Wall Street to briefly create a self-fulfilling prophecy.
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