Key insights
- The author observes a divergence between crude oil prices, which have priced in a resolution of the Iran conflict, and gold prices, which remain elevated. This suggests institutional skepticism about the proclaimed ceasefire. The author believes crude oil may have further downside if gold's signal proves correct, implying a potential risk-off move that could negatively impact US equities.
I’ve been watching the crude tape closely this week and something does not add up at all.
Trump declared total victory on Iran, the market sold off the war premium in crude, everyone moved on. But Hormuz is not actually fully open. There are still idle tankers, freight costs are not normal, and Iranian barrels aren’t back on the forward curve yet. The physical market and the political narrative are in two completely different places atm.
The thing that’s bugging me the most is gold. If this was genuine resolution, gold should be selling off too but instead its holding above $3200 while crude falls. Imo that’s not a risk-off unwind, that's institutional money saying ‘we don't fully believe this’ while selling the obvious war premium trade.
So either crude catches up the golden age narrative and rips, or gold is right and crude has more downside. The tape is pointing at the second one but I've been wrong before.
Anyone else watching this divergence or am I just overcomplicating it?