What to anticipate from oil?

“The other major commodity associated with war is gold”

Using rolling 12-month returns from January 1979 to September 2015 of the S&P 500, gold was positive at least half the time regardless of whether there was a bull, bear or flat stock market. The stock-market condition didn’t necessarily say anything about gold returns, but gold performed well when there were bearmarket conditions.

It was the highest percentage of the time, 74%, in bearmarkets that lostmore than 20%, and on average gold gained 6.5% historically in this condition.

Considering most single factors like inflation, interest rates, jewellery demand, oil prices, geopolitics and US dollar strength don’t alone move gold, they are unreliable indicators of gold’s prices.

However, one

statistic that is pretty solid through time is that gold is uncorrelated to the stock market.

On average, the 12month correlation is zero but even on short intervals of rolling 90 days the correlation doesn’t ever exceed 0.6.

Based on this, the case can be made that gold is protected in down markets and has been a good diversifier.

And so, despite the tragedy of the attack on Paris, commodities may help investors diversify through this difficult time.

Oil prices have historically spiked in times of crisis, and with the production dilemma on the table for Opec, Saudi may need to reallocate resources to national defence.

Furthermore, there may be a demand reduction from the crisis but not enough to offset supply issues.

This also holds true for agriculture and livestock, which are more highly impacted by weather andmay benefit from El Niño in the near future. Additionally, gold may also hold its role as a diversifier as it has in the past during stock market crises.

Jodie Gunzberg is head of commodities at S&P Dow Jones Indices