Gold and oil both posted gains on Tuesday, the former on gains by the euro, with some concern over Iran’s nuclear progress, and the latter on increasing concerns over the effect of tightening sanctions.
Bloomberg reported that news of success by Tehran in producing its first nuclear fuel rod spurred some thin gains in the price of gold in light holiday trading Monday, while more gains came, said Reuters, as the euro rose against the dollar and showed a tight correlation with the euro/dollar exchange rate. Oil rose as well over both political worries and economic news, as the threat to supply because of sanctions vied with rising demand because of expansion in Chinese and Indian manufacturing activity.
Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services Pvt. in Mumbai, was quoted saying about the rise in gold, Iran’s nuclear plans have raised fears that it is getting desperate and will take some drastic step. More sanctions are expected from the U.S. and other nations. This will have a positive impact on gold prices as ideally people would try to buy gold.”
Experts, however, are divided on the direction of gold prices and the reasons for any change. RBS commodities analyst Nikos Kavalis said in the report, "Gold didn't really react to the safe-haven issue in Iran that much. Oil has, obviously, but you haven't really seen that safe-haven, geopolitical risk investor come in at all really so far. I would say it all really depends on the euro for the time being. This is really where gold takes its cue from."
Amrita Sen, an analyst Barclays Plc in London, speaking in a Bloomberg interview about oil's increase, said, “Iran will probably be center stage this year, at least in the first half. The risks surrounding Iran are clearly rising. Demand could surprise to the upside, and I’d especially highlight China.”
February crude rose as much as $2.66, to $101.49 a barrel, in New York Mercantile Exchange electronic trading; in late morning trading in London, it was at $101.39. February Brent oil rose 2.5%, gaining $2.72 to hit $110.10 a barrel on the London-based ICE Futures Europe exchange.