In the last few weeks, silver has been performing better than gold, which is an indication of the fact that most of the price pressure in precious metals is behind us. Gold miners can profit from this, but there is another factor that could help them: the lower oil price.

The decision of the OPEC to not lower production is clearly an effort to deal with the overcapacity in the sector aggressively. They can do that because most members of OPEC can still produce oil at $20 per barrel.

Overcapacity arose mainly because of the rise of fracking in the United States. The question, however, is how long the shale oil industry can survive at these cut throat levels for them? The U.S. needs to spend 1 barrel of oil to produce 1.5 barrels.

The lower oil price is a blessing for gold miners in any case. Oil is namely the main cost factor when producing gold. Have a look at the chart below now:

While the price of gold has leveled off more or less these last 6 months, the oil price dropped by about 40% over the same period. This is good news for gold miners and their cash flow positions.