Precious Metals Gain Appeal Amid Rising Volatility and Inflation Risks

The expectation of an imminent Middle East peace deal promoted by Trump has been fractured this weekend.

The renewed closure of the Strait of Hormuz is squeezing the global crude market, and as supply disruptions drag on, refiners worldwide remain on high alert.

Now Iran has once again restricted vessel traffic through the strait just one single day after.

Promising to keep it open, we are now barreling toward a critical deadline.

The current ceasefire expires Tuesday night US time between the US and Iran and planned peace talks in Islamabad are suddenly in doubt.

Now we have already seen massive commodity volatility so far in 2026.

So where do we go from here?

Well, joining me live this morning is Jim Wiederhold, Commodity Indices Product Manager at Bloomberg.

Jim, good morning.

Thank you so much for joining me.

Well we're here on this Monday morning as we kick off a new trading weekend once again there's uncertainty regarding the geopolitical situation in the Middle East, but we have seen massive volatility in oil prices.

So where do you think we go from here?

It's anyone's guess at this point because it's kind of a 50/50 scenario of whether we're actually going to get a complete ceasefire and an end to the war or if it's going to continue.

So the last two major times in the last 20 years when oil rose above $100 it tended to stay that way for at least 6 months.

And in the case of 2011 when prices jumped to $100 they didn't really falling meaningfully until like 3 years later.

So hopefully.

You know that's not the case this time around, but it's anyone's guess at this point.

Yes, so as you mentioned, there's a lot of uncertainty.

We don't know what is going to happen, but at the same time, we do have data in terms of oil performance so far this year.

So when it comes to oil positioning, tell us what the reality is.

Well, at the beginning of the year there were expectations for a huge oil glut.

We had so much supply demand was OK, but it was a completely different narrative compared to what occurred.

Over the first quarter, so oil prices were trading around cost of production levels around the world, reflecting that very huge supply, and then immediately we had 20% of world oil exports shut off completely, which caused the spike in oil prices.

So you see that reflected in the prices.

Some of it has been rerouted, so we still have a 10% world oil supply shut off.

Oil prices have remained elevated, so no matter even if the other commodity producing countries produce more, we're still in a situation where it might take months or over a year or two to get all the supply that we had back in January back online.

So we'll see, and it's really interesting because we're hearing from some of the major oil companies, US listed companies including Exxon as well as Chevron, looking to other regions of the world, not just the Middle East, but also South America as well as Africa.

In terms of exploration, so there's a lot to be said about what's unfolding in the Middle East.

A lot of the infrastructure in the Middle East will require plenty of time to repair.

So what impact does this have not just on interest rates as well as the economy, but also businesses?

So I mean in terms of the actual effect on businesses, this is going to raise the cost of business worldwide for almost every sector.

So basically you know earnings have been pretty good across the equity space, but margins are good as well.

But the cost side of the margin equation is going to increase, so that could potentially lead to some risk going forward in terms of companies beating their earnings estimates going forward.

Energy tends to be the first mover whenever we have these rise in costs of business historically.

So if that happens, you can see that translate to further sectors within the commodity space moving higher as well, like the grains, because not only oil has been shut off, but fertilizer exports were shut off with the Strait of Hormuz as well.

So you could see a rise in grain prices next potentially because that's.

We've seen historically with energy first, sometimes metals we've already had precious metals move up pretty dramatically.

Industrial metals are on the rise now as well, so aluminum supply was cut off too.

So aluminum prices are up about 20% this year also.

So we're seeing just a general rise across the commodity complex in prices which is just going to increase the cost of doing business.

I'm glad that you brought up metals because it's not just precious metals that we're watching.

It is the whole.

Complex.

You brought up aluminum, but we're also watching copper prices.

And when we think about the highs we saw for spot gold this year, we are off those highs, but we do remain elevated right around the 4800 level, and we're just coming off tax season, so Americans are looking at their portfolios.

So when it comes to gold and precious metals, what role do they play within a portfolio when it comes to diversification?

Just as with all commodities, they're uncorrelated to other asset classes.

We had that big spike in gold, silver, platinum, and palladium as well in January.

I think it was the last time I was on here the price fell off a cliff, and that's what you see historically.

Gold prices, they tend to move higher over a 2.5 year period.

We've had that, and then they tend to consolidate for months or potentially years until they have their next move.

So we're seeing portfolio reallocation after some profit taking, central. have cooled off on their massive purchases that we've seen over the last three years because of the high price likely, but we're seeing people reengage and we're seeing just more inflows in general to the broad commodity space.

So after decade, one decade, the 2010s, where people weren't interested in the asset class, we're seeing a complete reversal of that as it's a completely new macro regime in the 2020s with higher costs, higher rates.

We're seeing.

Fragmentation of global trade globalization is turning a corner, so all this leads to higher prices and people are looking at the asset class again.

So that's what we're seeing, and Jim, while I have you here, I do want to get your take on crypto.

It's really interesting because we just had the ringing of the opening bell here at the New York Stock Exchange and SEC Chair Paul Atkins rang the bell.

So we know when it comes to the digital asset space, a regulation does play a huge role.

When we look at Bitcoin, we're looking at the price action fairly range bound so far this year and right now it is around the 75,000 level.

What you're seeing in crypto and your expectations for 2026.

It was pretty interesting that crypto kind of moved lower ahead of when equities did, so some people are looking at crypto particularly Bitcoin as a gauge of risk sentiment, and that's been the case for the last few quarters.

The SEC is slowly approving more cryptocurrencies, and we're seeing inflows. a lot less than we saw maybe 1.5 to 2 years ago, but there's clear huge institutional adoption, so it's becoming more of a mainstay as a major asset class that you need to consider going forward because it is uncorrelated.

It has different drivers compared to other alternatives.

It's clearly in the alternatives piece of a portfolio, but we're seeing it is interesting that we're kind of seeing it.

At the bottom and moving higher, it does move with risk assets from time to time.

It's a little more correlated than commodities in general, but one interesting aspect is the volatility has continued to come down.

You know, a few years ago we had a 100 handle on the volatility of Bitcoin, and now it's halved and it's potentially moving lower as more and more different market participants engage in the asset class and as you mentioned, we did see the.

Morgan Stanley's bought Bitcoin ETF and we are starting to see a lot of the institutions move into this space as well.

So since you mentioned volatility, what other indices or indicators are you paying attention to when it comes to both the risk side as well as volatility?

So, I always look at the VIX, but then you can also look at the move index, the bond index to see if there's a volatility across asset classes.

One thing that I always look at is the Bloomberg Commodity Index BCom.

The volatility of that has basically been in line with equities with our B500 index.

If you look over the last three years, they've been about the same.

Obviously commodity volatility has really picked up as the energy space has exploded higher in price.

So it will be interesting to see over the next few weeks if things calm down.

In a more normal fashion, which is what you expect after spikes, but it's all dependent on these news headlines which change every few hours.

So it's a very interesting time.

Jim, a lot to keep our eyes on as we head into the rest of the quarter.

So thank you so much for joining us.

I appreciate all of your insights and your perspective.

Thank you so much.

Appreciate it.

Thank you so much.