Want To Know Where Oil Prices Are Heading Next? Then Keep An Eye On Gold

Phil Carr
Updated: Apr 17, 2024, 07:29 GMT+00:00

There’s no question, 2024 will go down in history as one of the most profitable years ever for Commodity traders – And this could just the beginning!

In this article:

From Metals to Energies: Unraveling the 2024 Commodities Boom

This is now the fourth consecutive year that has seen a total of 47 commodities ranging from the Metals, Energies to Agriculture tallying up astronomical double to triple digit gains.

So far this year, traders have piled into Commodities at one of the fastest paces ever seen to capitalize on the biggest macro themes driving the markets from persistent geopolitical tensions, the EV revolution to the global pivot towards interest rate cuts.

According to data tracked by GSC Commodity Intelligence – capital inflows into Commodities over the 1st quarter of 2024 have totalled a whopping $1.4 trillion. That’s the biggest net inflows on record since 2007.

The Commodities boom has been further supercharged by stickier-than-expected inflation, which has bolstered demand for Commodities – known as “the ultimate inflation hedge”.

Oil, the biggest and most traded Commodity in the world, has climbed this year amid escalating conflict in the Middle East coupled with higher-than-expected demand and an OPEC induced supply deficit. Last week, Brent Crude Oil soared above $92 a barrel for the first time since October.

And the rally might not stop there!

Global oil markets are on track to be “extremely tight” in the second half, with prices trading in the range between $100 and $125 a barrel this year if OPEC and its allies extend current oil production cuts through the end of the year.

Additionally, an interesting angle has been raised by political economists on Wall Street – signalling an interplay between Oil prices and U.S presidential election.

The thesis is that Saudi Arabia might try influencing the U.S election by raising Oil prices in order to ensure President Biden loses to Donald Trump. Historically, no U.S President has won an election when the price Oil has traded near the $100 a barrel mark.

Gold’s Unstoppable Climb in the Commodity Market

Elsewhere in the Commodity markets, one of the real star performers is Gold.

Gold’s meteoric rise to glistening new heights has continued to go from strength to strength this year, significantly bolstering its iconic status as the ‘must-have’ asset class in every portfolio.

On Friday, Gold prices skyrocketing to a new all-time record high of $2,431 an ounce, surpassing the precious metals previous all-time high of $2,376 an ounce that had been set only a day earlier.

The precious metal is up over 23% since mid-February. But more impressively, Gold prices have now chalked up an incredible gain of more than 35% since October.

Analysts at GSC Commodity Intelligence believe the ratio between two of the world’s most-traded Commodities is “worth paying close attention to”.

Oil prices tend to be supported during periods of sticky inflation, while Gold is traditionally used as a hedge against inflation. This positive correlation indicates that higher Gold prices often coincide with higher Oil prices.

About the Author

Phil Carrcontributor

Phil Carr is co-founder and the Head of Trading at The Gold & Silver Club, an international Commodities Trading, Research and Data-Intelligence firm.

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