Home » Features » Will Gold and Oil Prices Continue To Rally Amid Mideast Tensions?

Will Gold and Oil Prices Continue To Rally Amid Mideast Tensions?

Dimitar Bogdanov
  • January 6th 2020, 15:48
  • Last Updated: January 6th 2020, 16:00
  • Safe-haven assets receive more attention as U.S.-Iran tensions escalate
  • Gold prints a new 7-year high
  • Oil higher on fears of supply disruptions

Gold and oil spot prices have surged in the past couple of days on the back of rising geopolitical tensions following the assassination of the top Iranian general by the United States. 

Gold hits highest levels since 2013

A mix of a very good last year and the start of the new year marked with higher Mideast tensions have seen gold surpass the previous 6-year high of $1557. This morning, gold spot prices have printed $1589, a level not documented since April 2013. 

The new levels come as no surprise as tensions in the Middle East fuelled the demand for safe-haven assets, a category in which gold has historically been dominant. Investors prefer to have their assets in havens as the world awaits the Iranian response to the killing of their second most powerful person by the United States. 

Technically, the price action has stopped at a major resistance near the $1590 level. We are yet to see whether fundamental reasons will prevail over technical aspect of the market, but very important levels, as this one, tend to hold their ground at the first test. 

Gold spot daily chart (Source: TradingView)
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Hence, from a technical perspective, gold spot prices should at least have a break, or a minor pullback, before attempting to move above $1600. In case the fundamental aspect prevails, the chart suggests buying gold spot and targeting at least $1630 short-term or $1730 mid-term. 

Crude oil may cool if Iran does not retaliate promptly 

Similarly to Gold, crude oil prices have moved higher in the past couple of days on the back of increasing Middle East tensions, as this region is home to major oil producing countries and key energy supply routes.

Today, crude oil futures hit a new multi-month high of $64.69. The price stopped at a horizontal resistance, which has played an important role in the past. 

Crude oil daily chart (Source: TradingView)
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MK Surana, HPCL Chairman, believes that oil may pull back soon if there is no major retaliatory action by Iran soon.

“The news has been factored in the price. Now it’s about the perception of the people, whether it will escalate or not. Some new trigger can only take it further in the next few weeks. But if there is none, prices will come down.”

Still, the commodity market analysts agree that this chain of events has the potential to drive oil prices up. If this is the case and investors continue to buy oil, then the next apparent target for the bulls is $66.58, which represents a 2019 high. 

Summary

As expected, gold and oil prices have driven higher today on the back of rising Middle East tensions. While Gold is completely driven by geopolitical events, concerns over supply disruptions mean that oil is high on investors’ agenda as well. However, both assets may pause or pull back if the U.S. – Iran tensions cool down in the coming weeks.

About the author

Dimitar Bogdanov
Dimitar Bogdanov
I have been a journalist for Invezz since 2012 and am one of the oldest on the team. My focus is on cryptocurrencies as well as general equity markets, although my experience is broad overall.

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