Commodities Week Ahead: Mideast Crisis a Reset for Oil, Gold Bulls
Just on Friday, oil and gold longs would have retired for the weekend expecting more downside from a global macro trade that had given them the thumbs-down.
What a difference 24 hours can make.
The same bulls in crude and bullion would feel they have entered a new world on Monday as oil jumped as much as 4% in Asian trading — it rarely moves beyond half a percent in that session — and gold exceeded usual gains too, with a 1% rally, after Saturday’s dramatic attack by the Palestinian terrorist group Hamas on Israel.
John Kilduff, a partner at New York energy hedge fund Again Capital, who has spent two decades analyzing the impact of Middle East geopolitical strife on oil, likened the crisis to the “reset” sought by those hoping for a game changer in the two assets, after a woeful start in October trading.
“How much” of a boon the crisis will be in pushing prices higher — particularly those of oil — will be determined by how severely affected crude production and exports are by this; i.e. how many barrels are we talking about, and how those stack up on the already squeezed global supply situation for oil from OPEC+ output cuts, said Kilduff. He adds:
“Firstly, for those who wanted a market reset, this is it. This is a multifarious crisis with so many angles that it’s virtually impossible to find a solution quickly and there’s no one fix for it. For perspective, it’s like a scaled-down version of 9/11 that promises to drag on in terms of impact, while spinning multiple subplots. And oil and gold, as leading commodities in the macro trade, thrive on such subplots.”
“But while there’s a huge immediate shock value, as well as durability and elasticity, in this crisis, what will matter in the end is the actual impact on oil
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