Over the weekend, Israel launched a completely new and extremely intense attack on Iran’s oil reserves in Tehran.
This attack directly escalated the war to a new level, as oil is currently the most closely watched resource while supply has already been tightened due to the Strait of Hormuz being caught in the conflict zone.
Immediately at market open this morning, oil prices surged to over $110 per barrel under the impact of this attack, pushing oil prices up more than 70% since the Middle East conflict erupted.
However, in contrast to oil prices, gold faced extremely heavy selling pressure even though it was supported over the weekend to rise to $5171/ounce by the NFP report.
The sharp surge in oil and the strong sell-off in gold are clear evidence that market capital is shifting strongly from gold back into oil. In addition, major investment funds are beginning to take profits on gold as its growth since the beginning of this year has been too rapid and strong.
In the short term, gold will likely move sideways within a wide range as capital continuously flows in and out between gold and other risk assets, while oil is expected to continue breaking higher as the Middle East conflict shows no sign of stopping.
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