Gold is better positioned than oil to benefit from US-Iran tensions and ASX small caps are showing it today

“While warfare may shore up public sentiment towards the President, surging energy costs almost certainly will weaken the US and global economies,” she said.

“Similarly, another military engagement in the Middle East is likely repellant to US voters.

“So, despite near term angst, the marginal barrel of oil likely will continue to come from the US, and as such will not command a long-term geopolitical risk premium.”

Bays set 4 million barrels per day as the supply level that would have to be disrupted, but said it was more likely the appreciation in oil price would wane similarly to the way it did following the attack on Saudi Arabia’s Abqaiq facility last September.

“The market’s initial reaction to the US airstrike killing of one of Iran’s most powerful generals should fade, but is another catalyst to a more enduring boost to gold than crude oil,” McGlone said.

“OPEC is fighting a losing battle to offset non-OPEC supply and slack demand, in our view. Central-bank buying and exchange-traded-fund inflows are good indicators of gold’s favourable demand versus supply balance.”

He noted gold ETF holdings had risen 1.4 per cent so far this month.

McGlone argued that for gold to not hit $US1,600 ($2,303) by February, history would have to be defied. This is because January is usually a solid month for gold.

“Gold hasn’t had a bad January since 2013 – the metal will approach [US]$1,600 by February if it matches the 5.2 per cent average January increase of the last five years.”

Gold explorers outdoing the oil explorers

While individual small caps are more affected by project developments, commodity prices can have an impact.

For instance, when gold cracked $2,000 last year, over 60 gold small caps gained.

Today, on the first trading day since the assassination, 38 gold stocks were in the green — three times as many as the number of oil stocks that rose today.