Both oil and gold are up since the March bottom and many say the benefits of investing in them are very similar, but which is a better buy now? Jerry Castellini, president and CIO of CastleArk Management and Bart Melek, global commodities strategist at BMO Capital Markets shared their insights.
“Oil has two distinct advantages over gold—principally, the supply and demand argument,” Castellini told CNBC.
He said a “rapid deterioration” of oil production is taking place around the world.
“Combine that with the world’s need for oil to grow,” he said. “So you combine falling supply with rising demand from an economic standpoint."
"Oil has a very solid base, going out into the next 5 to 10 years and it’s not as dependent on some of the more monetary driven fundamentals that gold is,” Castellini said.
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In the meantime, Melek said gold will likely continue trading higher into 2010 and 2011, amid rising inflation concerns and the weakening dollar.
“The U.S. dollar is likely going to weaken over the longer-term and gold seems to be the perfect hedge to protect against the devaluation of the dollar,” he said.
“The U.S. dollar needs to weaken to reestablish some balance of U.S. current account and trade deficits. In the same time, we see inflation increasing quite a bit and gold as a hedge against inflation—the physical demand will likely increase because of that as well.”
Melek added that as wealth in China and India increase, their propensity to consume gold is going to be much greater than in the past.
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No immediate information was available for Castellini or Melek.
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