Gold vs. Oil, Equities and Lumber - Pension Partners

Gold prices in relation to oil are reaching record levels as the ‘fear trade’ pushes investors to find a safe-haven, but one market technician says he’s focusing instead on the metal’s correlation to lumber. 'We look at gold in a different way than a lot of investors,’ Charlie Bilello, research director for Pensions Partners, told Kitco News Thursday. He explains that the relationship between gold and lumber prices are indicative of volatility in equity markets. According to Bilello, lumber reflects the state of the country's consumer-driven economy, which is so focused on housing. 'You don’t want to see gold, which tends to be more uncorrelated to the economy, outperforming lumber,’ he says. Equity markets have had their worst start in history so far this year as gold prices rallied, and Billelo points out that all the while, the yellow metal has been outperforming lumber. ‘It happens to be very important for the U.S. in particular because we’re a very consumer driven economy and lumber is the closest commodity tied to that,’ he explains. Bilello also comments on plunging oil prices and how the correlation between crude and gold prices continues to climb. 'You have crude oil down over 80% from its peak, you have gold down 40%, which is actually better than a lot of commodities coming into this year,’ he says. ‘So, you have a lot of negativity, a lot of fear in terms of commodities going forward.’ However, he adds that the oil market should start to stabilize going forward and this will spill over into the commodity sector as a whole. Kitco News, January 28, 2016.