The increase in the price of oil may be accountable for the increase in inflation. This increase in inflation has a negative effect on the whole global economy, not to mention the oil-dependent economies such as the US. Transportation, heating, utility, and basically all finished products reflect the high price of oil. The US accounts for only 5% of the world’s population but it consumes about 25% of the world’s fossil fuel – based energy.

Most of the oil reserves are located in areas where tensions have been building up for years. These regions are: Middle East, Venezuela, Nigeria and Saudi Arabia. The simple rise in the oil-price can be nothing compared to the side effects that could be caused if something bad was to happen in this region.

The link between the gold and oil was created due to the fact that the Arab producers wanted to receive gold for the oil they sold. The original concession in Saudi Arabia was made by King Ibn Saud in the year 1933 and he demanded that the payment be made in gold. The use of “promise payment” such as US dollar as a medium of exchange is forbidden by the Islamic law.

In the year 1975, the OPEC took the decision of selling all its oil exclusively for US dollars. The pricing of gold, commodities and oil started from this point forward. In 1971 the OPEC had nothing to do than to convert their excess US dollars by investing in gold on the market. This happened because the US ceased gold convertibility. This is the reason why oil and gold prices increased considerably.

Due to the supply and demand imbalance and the fact that the dollar is declining, the price of oil can have an upward trend. This is a possibility even if there are no terrorist attacks or geopolitical threats. When this happens the price of gold will reach significant new peaks, so be ready to invest!

Learn how to buy gold in times of recession by professionals.