Portugal is asking for a bailout. Japan has suffered earthquakes, a tsunami and still faces a nuclear crisis. Interest rates in Europe and China are on the rise, and the U.S. government could shut down this weekend. Yet despite these messy economic problems, the price of oil continues to rise, alongside gold.
Oil usually slides when financial troubles hit. But this time, geopolitical troubles in North Africa and the Middle East trump the growing list of economic woes. Gold, meanwhile, is strengthening in part because investors are nervous about economies around the globe.
And, as two of Canada's most valuable commodities rally, so too does the loonie. Oil closed at $110.30 (U.S.) a barrel Thursday. Gold , which has been pushing record highs, ended at $1,459.30 an ounce, and the Canadian dollar closed at $104.33 against the U.S. dollar.
"[Oil]is a supply story," said Benjamin Tal, deputy chief economist at CIBC World Markets Inc. "If tomorrow, all the political situations were resolved by magic, then you would see a significant drop in oil prices."
Libya, which usually fulfills about 2 per cent of the world's oil demand, has scaled back exports because of its growing conflict. Meanwhile, traders are worried that political unrest will sweep across other major oil-producing countries, further stemming supply.
This isn't to say economic forces are not playing a role in oil prices. Mr. Tal argued that oil would be trading at about $150 (U.S.) a barrel now if Europe and the United States were not suffering financially. When political tensions in North Africa erupted earlier this year, oil was trading at about $90 a barrel, Mr. Tal noted, making it very easy for oil to climb to $110.
"What was peak in the past is now the low, or the starting point," he said.
Ian Pollick, a rates strategist at TD Securities, believes global economies are stronger than they seem, and that, too, is helping oil rush higher. But, at the same time, for those who are not digging deep into the data, fear is pushing them to buy gold.
"There's a lot of dark and terrible things taking place, but beneath the surface there's actually a very resolute sense of calm," he said. "But at the end of the day, the past three years ... scared people.
"Retail investors are traumatized by what happened in 2008, so gold has always been this quality metal. And on top of that, it is good in inflationary situations, it is good in geopolitical scenarios, it is good when you have general uncertainties," he said.