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Why do gold prices diverge from oil prices when Shale Oil production increases?

1. Gold prices increase as inflation increases. When government debt increases than gold prices increase.

2. The price of oil decreases as net exports of shale oil increase, even when inflation is 6.5 percent. The increased supply of oil domestically means more tax revenue and reduced trade deficits offsetting the devaluation caused from inflation.

3. Over 65 percent of all international trade is done in dollars. As US shale oil exports from increase than more demand for dollars to pay for the commodity occurs. Other currencies are exchanged for dollars.

4. The US is the largest importer of Crude oil. When crude oil prices increase more dollars leave the US to buy the commodity. If the dollar strengthens against other currencies than it will buy more commodity meaning it has a great purchasing power

5. Gold price is reflected by the collective expectations of the future by the free market.

6. Gold is a safe haven when the economy is faltering. It does not earn income, only price appreciation and capital gains when sold.

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