when conflict erupts why does it cause commodities to spike/cause a volatile market?
for instance Gold and oil is it because it is used as a safety sort of thing? or is it because countries demand these resources? supply constraints? I’m confused here.
Multi-national companies, banks and funds cannot operate like the ordinary citizen. If we’re not sure of the future we can just leave our money in the bank account until the situation is clearer. The big players can’t do that, they have to buy something with the capital, it has to be in something, otherwise inflation just eats it away. Gold is a safe haven commodity, so it is a good protection, they hope, against inflation and war disruption.
Wars generally increase risk for cross-border trade, sometimes a long way from the front lines. Oil is the blood of a modern developed country, so it’s highly sensitive to supply issues and negative price effects.
does gold and inflation have a direct relationship with one another or inverse?
It’s really complicated, but mostly, overall, gold prices usually rise (and sometimes significantly) during inflationary times. So the overall relationship is much more direct than inverse.
Exactly this.