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USD and oil prices move in opposite directions because oil is denominated in dollars.
Oil, gold and commodities have all been priced in US dollars since 1975 when OPEC officially agreed to sell its oil exclusively for US dollars. From 1944 until 1971, US dollars were convertible into gold by central banks in order to adjust for any trade imbalances between countries.
The Gold, Oil and US Dollar Relationship
http://www.gold-eagle.com/article/gold-o...
High oil prices can cause the entire global economy to suffer. In reverse, as the USD declines, oil producers are paid fewer ‘units’ of foreign currency in exchange for oil. They must compensate for this decline in real revenues by raising the price of oil (in dollars).
A sell-off in the USD would result in a corresponding increase in oil and gold prices.
There is growing dissention among religious fundamentalists in Saudi Arabia regarding the exchange of oil for US dollars. Islamic law forbids the use of a promise of payment, such as the US dollar, as a medium of exchange.
There have even been discussions among Arab nations about pricing oil in Islamic gold and silver dinars. If this happens, demand for the USD will plummet, sending the dollar into a freefall while demand for euros, gold and silver soars.
I would like the relationships between the three, preferably in details as in which one's rise causes which one's fall. Thank you.
