The World Is A 'Minefield,' Gold & Oil To Move Higher - Analyst
(Kitco News) - Gold and oil prices should be higher if the market is a true reflection of the geopolitical landscape right now, this according to one analyst, who expects these “bellwether” commodities to gain momentum.
“Gold and oil have been steady this year, and when looking at the markets across all asset classes one would assume that the geopolitical landscape is calm, but they would be very wrong,” noted Andy Hecht, author of the weekly Hecht Commodity Report on Marketplace, in a recent post.
“The fact is that the world is a minefield these days with potential problems that are likely to launch one if not both of the commodities that the world watches like a hawk much higher than their current prices.”
For Hecht, the marketplace is on thin ice, especially as he analyzed different regions in the world with the potential to spark geopolitical uncertainty. For that reason, oil and safe-haven assets like gold should remain floored.
“Gold and crude oil are highly sensitive political commodities, and the current state of the world is highly supportive for price gains in both on a long-term basis,” he wrote.
First, he looked at North Korea and the questions surrounding Kim Jong-Un’s nuclear plans.
“If the current level of rhetoric and barbs are a sign, it is likely that Kim Jong Un will continue to provoke the United States in the weeks and months ahead,” he said. “[I]t is likely that the situation in that part of the world will provide support for the price of gold as a safe-haven asset.”
The same can be seen in the Middle East as President Donald Trump has been unable to finalize a nuclear deal with Iran. Any instability within the region would not only boost safe-haven gold but oil prices due to the region’s rich oil reserves.
“The bottom line is that both gold and crude oil are highly sensitive to the uncertainty that will create fear in the Middle East,” Hecht said.
Finally, he pointed to China and Russia, two major gold-producing nations, and two countries with major impacts on the oil market.
“There are political landmines surround each of these world powers,” he noted.
Deteriorating relations between Russia and the United States can be unsettling for investors. Likewise, China and the U.S. face “more than a handful” of potential conflicts, including their dealings with North Korea.
“The bottom line is that while the stock market in the United States continues to make new highs on a daily basis, the geopolitical landscape presents so many issues that will face the world in the coming weeks, months, and years,” Hecht said.
“The quarterly chart of COMEX gold futures shows that the trend on the long-term pictorial is higher…The long-term trend in WTI NYMEX crude oil futures also displays a bullish price pattern.”