Gold and oil are soaring to cap a week full of Iran tensions, the Fed, and China trade-war woes

goldShop attendant Aya Ito holds gold bars at a jewellery shop in Tokyo.Reuters

  • Gold and oil prices have soared this week on the prospect of interest-rate cuts, mounting tensions between the US and Iran, and uncertainty due to the US-China trade war.
  • The yellow metal hit a six-year high as falling Treasury yields have boosted its appeal, and investors are seeking a safe haven amid US-Iran tensions and the US-China trade war.
  • "Oil is higher because of conflict fears," said Neil Wilson, chief markets analyst for Markets.com. "This is not a healthy position - it just feels wrong."
  • Watch oil and gold trade live.

Gold and oil prices have soared this week on the prospect of lower interest rates, rising tensions between the US and Iran, and uncertainty due to the US-China trade war.

The oil rally continued on Friday with West Texas Intermediate crude up 0.3% at $57.20 a barrel, and Brent crude up 0.6% at $64.90. After passing the $1,400 mark on Thursday, gold dipped by 0.3% to $1,392 an ounce.

Investors have bid up both commodities in anticipation of more cash flowing into markets and mounting geopolitical tensions. On Wednesday, Federal Reserve Chair Jerome Powell hinted the central bank could cut rates as soon as next month, spurring investors to shift their money out of US Treasuries. President Donald Trump reportedly called off retaliatory missile strikes against Iran at the last minute on Thursday, after the Middle Eastern nation shot down a US drone. While Trump and Chinese President Xi Jinping are set to meet at the G-20 summit later this month, they're unlikely to strike a concrete deal that ends the trade war.

"For the yellow metal, the combination of a weaker dollar and lower US Treasury yields can only mean a bullish outlook and the rally may not be over yet," said Konstantinos Anthis, head of research at ADSS.

"Tensions in the Gulf of Oman remain elevated while a trade deal between the US and China appears elusive at this point so gold could see even more demand in the weeks ahead, which could drive prices towards the $1,460-80 area."

Other analysts think a rising gold price is justified.

"Gold has risen to 6-year highs above $1400 really on nothing more than the Fed's (apparent) shift resulting in a breakdown in US yields," said Neil Wilson, chief market analyst for Markets.com.

"The opportunity cost of holding gold is significantly lower as real yields fall, while the rather dubious and risky outlook for the global economy, US-China trade and geopolitical tensions in the Middle East mean there is plenty of reason to be seeking shelter in gold."

While gold historically jumps in uncertain times, the rise in the oil price isn't as typical.

"Oil's gains are down to fears of escalation in the tensions between the US and Iran, not because global demand is seen rising," said Wilson. "Fear stalks the markets - the equity melt-up is predicated entirely on central banks juicing the money system."

"Oil is higher because of conflict fears," he added. "This is not a healthy position - it just feels wrong."

Here's the market roundup as of 9.24 a.m. (4.24 a.m. EST):

  • Asian markets were mixed with the Shanghai Composite up 0.5%, the SZSE Component up 0.9%, and Hong Kong's Hang Seng down 0.3%.
  • European equities rose in morning trading with Germany's DAX up 0.2%, and the Euro Stoxx 50 and Britain's FTSE 100 up 0.3%.
  • US stock are set to open lower with futures underlying the Dow Jones Industrial Average and S&P 500, down 0.1%, and Nasdaq futures down 0.3%.

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