Oil prices trading higher in wake of gold’s record high

Oil prices leapt up and are trading higher on Wednesday as commodities gained a boost from gold’s high, which struck an all time record above 1,080 dollars an ounce in Tuesday trading as markets fret about the prospects of global recovery from recession.

In late trading on Tuesday, New York’s main contract, light sweet crude oil futures for delivery in December, rose 1.47 dollars to close at 79.60 dollars a barrel on the NYMEX. In London, Brent North Sea crude oil price for December climbed 1.56 dollars to settle at 78.11 dollars on the ICE Futures Exchange.

“Oil was down this morning and all of a sudden gold took off like a rocket, and then oil took off as well,” said Ellis Eckland, an independent analyst. “Oil is following the lead of gold as a hard asset,” he explained.

“There may be a central bank providing liquidity to the market” that is benefiting commodities, the analyst suggested, noting that commodities are “alternative forms of currencies, especially gold.”

Inflation fears stoked by the massive liquidity pumped into the financial sector by central banks recently have pushed investors toward commodities to protect the value of their assets.

The price of gold soared to new record highs on Tuesday, topping 1,080 dollars an ounce, a day after the IMF announced it sold 200 tonnes of gold to India for 6.7 billion dollars.

“Gold and oil have been moving in the same direction recently,” said Adam Sieminski at Deutsche Bank.

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