3 Factors Driving The Rally In Gold

The inverse correlation between crude oil prices and gold is playing out to the core recently. While crude oil slumped heavily over the last 20 days, the opposite has happened with gold. From breaking down the 41,100 mark in late July, the yellow metal has recovered significantly and breached the $1,150 mark after more than a month.

Bob Alderman, head of wealth management at Gold Bullion International, was on CNBC Thursday to discuss what's driving gold's rally.

Fed Comments

"We think there are three drivers that are in the market right now: the Fed, China – and I'll also couple in other emerging market currencies with China in terms of currency devaluation – and short covering," Alderman began. "I think, as far as the Fed goes, the dovish comments yesterday certainly led many to believe that there will be no rate change until at least December."

China And Emerging Market Currencies

He continued, "As far as China goes and, I think, it's very important...to also add in that there are other countries and other emerging market countries that have suffered far greater currency devaluations that China has, although China is the one we point to."

Short Covering

"And then short covering, I think, what's happened over the last week or two is with so few contracts being long, short positions topped out at about 159,000 a couple of weeks ago. I think these shorts are providing fuel to exaggerate upside moves as they run for cover," Alderman concluded.