Gold and Oil Prices: Ready to Go Up Again?
Gold and Oil Prices: Ready to Go Up Again?
By:Ilya Spivak
Are gold and oil prices ready to go up again after strong waves of selling pressure struck both markets?
- Gold prices sink for a second day. Is the uptrend really over?
- Trump Fed Chair pick spooks metals, but big narrative remains
- Crude oil prices pull back but weakness may be short-lived
Gold prices continued to slide at the start of the new trading week after a historic plunge on Friday, January 30. That day, a brutal drop of 9% marked the biggest single-session selloff in 46 years. Together with Monday’s further drop of nearly 5%, the yellow metal has erased two weeks of upside progress in two days.
This brutal liquidation of a record-setting rally followed news that US President Donald Trump will nominate former Federal Reserve Governor Kevin Warsh to be the US central bank’s next Chair after Jerome Powell’s tenure expires in May. Warsh loudly favored hawkish policy for decades, until embracing the president’s dovish tilt most recently.
Gold price drop: pull-back or trend change?
Gold was enjoying a historic rally when the selloff struck. Six consecutive months of blistering gains sent prices to a record high and marked the steepest ascent for the yellow metal since early 1980. Then as now, overlapping geopolitical jitters including revolutionary fervor in Iran saw prices build a year-long rally into a violent spike.
Buying hit fever pitch in January 1980, then prices snapped violently backward in February and March before rebuilding back from those losses by September. Now as then, a wave of profit-taking worthy of the breakneck rally preceding it may be followed by a hearty bounce.
That is because the main impetus for gold’s unprecedented rise in 2025 appears to remain firmly in place. Prices rose by nearly $1700 per troy ounce, the biggest increase in dollar terms since relevant records begin in 1972, the first full year after the breakdown of the Gold Standard system.
As the new Trump administration set about escalating the trade war with China while threatening even the closest US allies with punishing tariffs, the markets found increasing appetite for a non-sovereign way to transfer value. Gold emerged as a hedge against the possibility that major countries could weaponize their financial systems.
Crude oil prices: new trend underway?
That logic seems likely to remain unchanged at least this year, regardless of whether a would-be Fed Chair Warsh might try to convince fellow central bankers to cut rates a bit faster. In fact, building inflation risk in the crude oil market might leave the newly dovish Warsh in the minority, outvoted by more hawkish officials.
Oil prices joined gold on the defensive Monday, but here too the losses come in the wake of a heroic rally. The benchmark WTI futures contract is on a six-week winning streak, rising 16.3% and marking the longest run of back-to-back gains since August 2023. However, it gapped lower Monday and slid 5.19%, the biggest one-day drop in three months.
That move was reportedly linked to easing concerns about a possible US strike on Iran after news reports suggested that the two sides were angling for a round of talks. A similar pullback on January 15 gave way uptrend resumption after just one day of losses. This one may be similarly short-lived.
Like gold, crude oil seems focused on a broader narrative. Its rise appears to reflect the realization that a disruption of sanctions-busting oil shipments to China might make a mockery of supply glut expectations. If this turns into a lasting drive higher for energy prices, the Fed will find it devilishly hard to satisfy Mr. Trump’s demand for lower rates.
Ilya Spivak, tastylive head of global macro, has over 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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