The Morning Gold Report: Gold Remains Above $900 as Oil Proves Resilient

June 20 a.m. (USAGOLD) -- Gold remains above the pivotal $900 level as oil continues to show its resiliency. With oil still well bid and likely to set new highs, inflation expectations remain unanchored. This should continue to support gold, given the fact that the yellow metal is seen as a hedge against inflation.

Oil corrected modestly on Thursday when it was announced that China would raise state-controlled fuel prices by as much as 18% in an effort to reign in inflation. One might imagine a fair amount of demand kill in China as a result, and the oil market corrected lower on the news.

However, that dip was seen as a buying opportunity as analyst subsequently concluded that the hefty hike in fuel prices would actually have little impact on China's voracious appetite for crude.

The Chinese are developing quite a love relationship with their cars. Nothing says you've joined the rapidly expanding middle class like the purchase of an automobile.

Car ownership has grown by 300% in just the past six years and it is estimated that anywhere from 10,000 to 20,000 new cars hit the road in China each day.

That's a lot of cars, and quite a trend. The oil market seems to think that a double-digit hike in fuel prices is only going to have a limited impact on the rapidly developing car culture in China.

There has also been some speculation that the price hike was in reality merely an incentive to bring idle refining capacity online ahead of the Olympics.

In the eight months since the state last hiked fuel prices, the cost of crude oil surged over 50% on the global market. As margins dwindled and even inverted, refiners apparently scaled back production, leading to wide spread fuel shortages.

China is supremely concerned about how they are viewed by the rest of the world. The Olympics are essentially their coming-out party and a fuel shortage during that period simply won't do.

Royal Dutch Shell has halted production of 200,000 bbl/day in Nigerian crude. The stoppage equates to about 10% of total daily production from Nigeria and comes as a result of Thursday's militant attack on its Bonga offshore oil platform.