The price of Brent crude oil topped USD 70/barrel twice this week, just shy of September’s peak of USD 71.95 after the attack on Saudi Arabia’s storage facilities. An overnight peak of USD 71.75/barrel during the week faded quickly with the commodity trading at USD 65/barrel at the time of writing.

Oil is back near the top of its range that has prevailed over the past year. But the USD 86 a barrel peak seen in October 2018 remains some way off given the current sentiment of de-escalation. We would expect this to remain the case unless the situation worsens regarding Iran.

Whilst a surge in oil prices is a cause for worry given how it can squeeze consumer spending, raise costs for companies and trigger an inflation scare, at current levels crude is at the lower end of the shock spectrum.

Another commodity on the ascent is gold. The metal certainly shone in 2019 (up 22%), thanks to a growing stock of negative yielding bonds in fixed-income markets but also on the back of political risks.

However, gold has briefly breached the USD 1’600/oz level setting a fresh multiyear high but has subsequently pulled back towards USD1’550/Oz. The USD 1’600 level was seen pretty much as a floor for the market from mid-2011 until the spring of 2013, so further strength in gold requires a sharper escalation in tensions between Iran and the US to spark a conclusive breakout.

When looking ahead to the remainder of the year, one could argue that a bigger push to gold beckons as the Middle East represents just one of several political risks on the horizon for 2020: US elections, Brexit/trade deal with the EU, alongside unrest across a number of emerging market countries, loom large.

Given the strong performance of risk assets in 2019, sentiment could be vulnerable to shocks and this arguably bolsters the case for adding more gold within portfolios.

In the near term, oil and gold warrant closer attention than other assets, but at this juncture, prices for both commodities are parked on the runway with their engines running but yet to receive clearance for take-off.