Oil closes in on USD 100, gold rises

Oil eyeing USD 100 again as the US considers another SPR release and a nuclear deal

Oil prices are naturally rallying strongly at the start of the week. Brent and WTI are both closing in on USD 100 once again and only a significant de-escalation looks likely to derail that. If the talks end badly today, we could see oil continue its ascent as markets factor in prolonged fighting in Ukraine and the risk of supply disruptions.

Talks are continuing between the US and Iran towards a nuclear deal which could help ease some of the pressures in the oil market. But we may not see the full benefits of that unless we see an agreement between Russia and Ukraine, at which point we could see a significant pullback in the price.

The US and other consuming countries are also reportedly considering another release of reserves totalling 60-70 million barrels. This comes after a similar move in November that had only a limited impact on the markets. But combined with actions elsewhere, it could help ease the pressures we’re seeing.

Gold jumps as safe-havens in demand

Gold is back above USD 1,900 in risk-averse trade and up around 1.5% on the day. The events over the last few days have no doubt escalated tensions, although talks between Russia and Ukraine do offer some hope. The sanctions, in particular, add another layer of uncertainty to the situation which investors naturally don’t like.

We’re in a highly uncertain, inflationary environment and gold is the obvious hedge. The question is how much further it can go which obviously depends on how much more of an escalation we’ll see and what that does to commodity prices. But for now, it’s very well supported, despite easing slightly off its highs.

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