Gold rally, oil higher on geo risks

Gold/FX

Gold is rallying as investors run to safety over fears the Fed will aggressively tighten policy and as the list of geopolitical risks continues to grow:  The Russian-Ukraine standoff will remain a tense situation for the foreseeable future, North Korea may resume nuclear tests, and Iran nuclear talks are approaching a decisive moment. The dollar edged higher as the Treasury steadied into the start of the two-day FOMC policy meeting.

Oil rises over Russia/Ukraine jitters

Geopolitical risks sent crude prices higher as a tight oil market that is already battling low inventories seems vulnerable to shortages in the coming months.  Energy traders don’t know how the situation over the Ukraine-Russia border will unfold or if Iran will be able to reach a nuclear deal, but the odds are something won’t go right and that will likely lead to some supply shortages for the oil market.

WTI crude may struggle to rise above last week’s high until markets get past the FOMC policy decision tomorrow as it could trigger a major de-risking market-moving event that even oil prices would not be able to avoid.  The oil market is poised to see higher prices, but volatility in both directions should increase given some of the rising risks to growth outlook.

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