Now Is the Time to Buy ‘This’ Instead of Gold… Market Leadership Will Shift After the Iran War Ends [Weekend Money]

Gold Loses Its Shine Amid Strait of Hormuz Closure
Stricter CME and Hawkish Fed
The Rotation Cycle in Commodities Is Set to Return

There is an analysis suggesting that if the war involving Iran comes to an end, market leadership will shift from gold to non-ferrous metals.

According to Daishin Securities on March 29, gold prices faced downward pressure during the war. This was because the Strait of Hormuz, a major export route for crude oil, LNG, and nitrogen-based fertilizers, was blockaded by Iran’s Revolutionary Guard Corps, heightening concerns over inflation. As a result, expectations for interest rate cuts by central banks around the world weakened, and gold prices, which have an inverse correlation with real interest rates, showed a downward trend.

Even if a peace agreement is reached between the United States and Iran, it is expected that gold prices will have difficulty surpassing previous highs. The biggest reason is the appointment of Kevin Warsh as the new chairman of the Federal Reserve. He is an advocate of simultaneously pursuing interest rate cuts and balance sheet reduction (quantitative tightening, or QT). If there are no monetary expansion measures, demand for gold as a tool for risk diversification will not be as strong as before. In addition, the Chicago Mercantile Exchange (CME) has changed its method for calculating margin requirements for precious metals to a ‘proportional system,’ where collateral automatically increases as nominal value rises. This is also seen as a factor limiting gold price growth.

Non-ferrous metals are considered more promising than gold. Theoretically, when liquidity is created in the commodities market, prices tend to rise in the order of ‘precious metals → non-ferrous metals → energy → agricultural products,’ each with a time lag. Currently, due to the blockade of the Strait of Hormuz, the energy-led market arrived earlier than expected, but if the situation stabilizes, leadership is expected to shift back to non-ferrous metals. As demonstrated by the number of interest rate cuts by central banks leading the non-ferrous metal market, prices are expected to rise until July next year.

Jinyoung Choi, a researcher at Daishin Securities, stated, “This war is not like the Russia-Ukraine war, which was fought over territory; it is a conflict that can be halted at any time if both sides secure real benefits,” adding, “If the scenario of a short-term war (March-April) remains valid, the next commodity to see a rise will be non-ferrous metals.”

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