SIMSETT,

SIMSETT, JULY
JULY 2019
2019

RELATION BETWEEN
OIL, GOLD AND
STOCK MARKET
By Tanisha Malhotra,
Div E, MBA 2019-2021

Gold, Oil usage and Stock Market are the three main
pillars on which the financial health of any country
stands. Where oil is the blood flow of industries, stocks
and gold are significant assets for businesses and the
government. Gold is a highly sought-after metal, not
only for its aesthetic usage but also as a store of value
and a liquid commodity. It is the safety net for most
families and businesses and is therefore hoarded,
especially in Asia.

Stock Market on the other hand is a propeller of growth.

It helps in raising capital and makes sure that the
economy remains Dynamic. But it is fraught with
uncertainties. One can become a millionaire overnight or
can wake up a pauper. Therefore, any Financial Investor
minimizes risk by investing both in the stock market and
in gold. This is because gold acts as a buffer to the highs
and lows of the stock market. It gives breathing space
when some investments turn undesirable.
 SIMSETT, JULY 2019

Now, both stock market

and gold are dependent on
the dearness of US Dollar
(USD). When USD is high,
the prices of oil too
increase which is caustic
for the demand of oil. This
leads to an increase in
production cost and the
dampening of the
economy. Gold too is
adversely affected by high
USD. There is a correlation
of 0.14 between gold and S and P 500.
The dollar in turn is dependent on Oil prices set by the
Gulf countries.

So, when there is a sharp rise in the demand of oil as

well expectations of rising prices, governments import
oil in bulk thereby raising prices of oil and the
subsequent dearness of USD leads to less investment in
market and gold. This trend if allowed to continue for a
long period sows the seeds of a market crash and
recession like status of the economy.