A Barclays Capital research [report] notes that gold prices are vulnerable to a recession – more so than some of the other commodities. In the last recession of 2008, gold prices appreciated the least among precious metals. Below is a table that ranks 30 different commodities. Words: 571
So says an article* posted at www.zawya.com.
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The article goes on to say, in part:
Of all commodities, gold is placed as the 8th [ see table below] most vulnerable in a recession, according to the BarCap study, which took into account inventory levels, correlation to emerging markets and their performance in the crisis of 2008.
Notes the BarCap research:
Gold’s fairly high ranking is interesting because it performed relatively well in 2008-09. However, this time around, gold prices have been stronger than they were prior to September 2008, whilst speculative positioning is also a little higher.
Gold’s strong performance in previous economic downturns is a positive, but not enough to offset these other negatives. It is important to note, however, that gold’s high ranking is also a function of fundamental factors such as costs and emerging market exposure, which are arguably less important in influencing gold prices than they are for other commodities.
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In addition, gold-supportive factors that are less important for other commodities, such as being a hedge of economic and financial uncertainty, have not been taken into account in the research [causing BarCap to express caution, as follows]:
Therefore, the implication of gold’s high ranking needs to be hedged somewhat. Nevertheless, it does suggest that if the financial factors that have supported physical investment buying were to fade, then gold prices could start to look very precarious indeed.
Crude Oil’s Vulnerability
[The report also mentions that] crude prices have [also] benefited from disruptive supplies from Libya to Iraq, Yemen, Syria, North Sea crude and underperformance in oil production in Russia, China, Canada and Nigeria, saying:
A relatively low level of inventories globally is supportive, but linkage to emerging markets is relatively low, whilst it has an above-average linkage to global growth and speculative interest is relatively high. Brent crude prices appear more vulnerable to a sharp slowdown in growth and oil demand than WTI, mainly because WTI oil prices have already fallen much further.
Crude oil spare capacity is very low. At an estimated 2-3m bpd, most of it held by Saudi Arabia and made up of more sour, heavy crude types, the global oil supply industry has very little slack in its system. This means that, as was the case in 2008, OPEC should have little difficulty in cutting output significantly if required. The combination of low inventories and limited spare capacity suggests a high degree of support for crude oil prices even if demand conditions deteriorate significantly.