The other week, gold closed above $2,300/troy ounce for the first time ever. Oil had a strong run too, above $90/barrel at the time of writing.

Source: Wall Street Journal
There has been a surge in demand for oil because the global economy is stronger than expected, with China showing early signs of recovery, and supply problems because of wars in Ukraine and the Middle East. Drone attacks in Russia, turmoil in the Middle East and strong consumer demand have propelled oil prices to their highest level in months, setting the stage for what could be a further surge. The rally in crude picked up speed recently after an Israeli strike on an Iranian diplomatic building fanned worries of a broader regional war.
Supporting prices is a relative lack of crude in global markets thanks to production cuts from OPEC and its allies.
Higher crude prices complicate matters for the US Federal Reserve. Consumer price inflation in the US appears stuck at about 3%, above the Fed’s 2% target. More expensive fuel can spill into prices for other goods and services.
Higher prices for crude and other raw materials, including copper, reflect surprising strength in the world economy. The growing appetite for energy has also outpaced efforts to move toward cleaner sources of power, leaving fossil fuels such as oil, coal and natural gas to fill the gap.
Brent crude futures, the benchmark, have climbed 18% in 2024 to exceed $90 a barrel for the first time since October.
Gold prices have surged to all-time highs as traders responded to signals that the US Federal Reserve (Fed) was preparing to cut interest rates later this year even as inflation remains stubbornly high. Gold, which offers no yield to investors, tends to benefit from a fall in real interest rates. Gold has rallied 15% since mid-February.
Traders are buying gold – perhaps as an inflation hedge – but also simply because the price is rising. Markets haven’t forgotten about inflation, but their attention has shifted to focus on the stronger-than-expected economy, which boosts demand for oil and gold. The S&P 500 energy sector is now ahead of the tech sector for the year to date, and gold stocks are running.
The danger for investors is that recent rises in inflation-sensitive oil, copper and gold are a signal that economic growth will lead to a second round of inflation, forcing investors to turn back to worrying about rising prices again. That nervousness is playing out in the bond markets, where yields are rising.
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