As Equities Bottom, Commodities Peak....Or Not?

Historically, there is an inverse relationship between the two types of assets. As equities rise, commodities fall and vis a vis. However, in the current market situation we have seen abnormal trends begin to appear.

As the TSX began to fall from its peak in June 2008 the natural inverse relationship was present with oil spiking @ approx. $140US in July of 2008 but as the market bottomed on Nov. 20th, oil too dropped below $50US.

Why is this? What happened to the predictions made by CIBC World Markets Chief Economist, Jeff Rubin that oil was to continue upward to $200?

There are a myriad of factors that have contributed to the fall in the price of oil that create a more complex relationship. To find out more, I suggest looking at Why are Oil Prices so Low?

But if Oil is so low then why is GOLD nearing its peak of Mar.08? According to Colin Cieszynski, analyst at CMC Markets Canada, "This rally, combined with a retreat in other commodities...suggests that significant fear over the global economy continues to overhang many markets and that precious metals continue to act as a haven for capital" Gold Futures Poke through $1000US an ounce

The current economic situation is giving us the opportunity to re-write the history books. As the financial markets become increasingly complex with the creation of more sophisticated investment tools there is no longer a simple solution to trend analysis.