The year of the pandemic put two commodities under the spotlight, but for different reasons. Gold prices hit an all-time high in August, while crude oil slipped into negative for a day in April, when demand crashed and inventories soared.
Both oil and gold have seen much volatility this year. Oil prices started 2020 at over $60 a barrel, dipped to the low teens in April – with front-month WTI Crude futures settling one day at a negative price – and rose to $40 in the summer, staying rangebound since then. The crash in demand pushed oil lower, while increased uncertainty over the economic and oil demand recovery, as well as the fears of a second COVID-19 wave, pushed investors to seek safe havens such as gold, driving the precious metal’s price to an all-time high of $2,075 an ounce last month.
The wild rides in the two commodities could represent buying opportunities, analysts argue, expecting oil and gold to rise in the medium term.
For oil, the uptrend may not come as soon as it could in gold, because of the heightened concern about the stalled demand recovery. Still, investment banks and analysts expect prices to increase from current levels over the next one to two years, especially if an effective vaccine hits the markets in 2021.
For gold, low or negative interest rates, continued economic stimulus, and the perception that gold is a hedge against uncertainty about the economy and the upcoming U.S. presidential election are expected to drive prices higher.
Alissa Corcoran, Director of Research at Kopernik Global Investors, told MarketWatch’s Myra P. Saefong that the short-term volatility in commodities could be an opportunity instead of risk.
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