Oil rises above USD 100, gold climbs

Oil above USD 100 and could keep going

Oil prices are soaring in response to the Russian invasion of Ukraine as traders are forced to price in sizeable risk premiums associated with the conflict. The market is already extremely tight and unable to easily contend with supply issues and, barring a shift in approach from certain producers with excess capacity, that’s not going to change.

With oil prices well above USD 100 – up around 7% on the day – and gas prices surging once more, the question becomes just how far they will go. There’s enormous uncertainty around how bad the situation will become in Ukraine and what impact that will have on supplies of oil and gas. The knee-jerk reaction has been strong and we could see prices settle if no further major escalations occur. Unfortunately, that’s a massive “if” given how today has progressed.

Gold could eye highs after the invasion

Gold prices are spiking as traders are drawn to the traditional safe haven in these turbulent times. The conflict in Ukraine brings enormous uncertainty which strengthens gold’s appeal as both a safe haven and an inflation hedge. The price has already hit its highest level since September 2020 and could have further levels in its sights.

The next big test will be USD 2,000, where it has only traded above briefly in August 2020, hitting a high that month around USD 2,072. The worse the situation becomes in Ukraine, the more likely it is that we’ll see those levels once more.

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