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Take your pick, or buy some of each, as it looks like the precious metal and oil will be rocking over the coming months. Rising tensions over oil supplies from the Middle East have created a scenario in which gold and gold stocks should rise as will energy shares.
Gold is a good bet because investors have historically seen it as a safe haven in times of political and economic uncertainty. And oil is buoyant because a threat to supply will drive up demand from other sources and, in turn, prices, which improves profit margins for companies in a position to make up the difference.
Oil prices are up 9% this year, worldwide, while gold rose 6% in the month following the European Union's announcement Jan. 23 that its members would embargo Iranian oil imports beginning July 1.
"Depending on the headline, the prices of gold and oil become more volatile as rhetoric and tensions with Iran escalate," S&P Capital IQ said in a research note. But "investors could position their portfolios to potentially benefit in the longer term."
The contretemps began over possible military dimensions to Iran's nuclear program and that prompted European Union members to call for an embargo. About 18% of Iran's oil exports supply the Continent.
Iran countered by threatening to cut supply to six EU members before their embargo was to begin. A few weeks later, on Feb. 19, Iran said it was turning off the spigot for Britain and France immediately, but those two countries get little of their supply from Iran.
Now, Iran's latest gambit is to threaten to shut down the Strait of Hormuz, a transit site for 20% of the world's oil.
Stewart Glickman, S&P Capital IQ's head of energy-sector research, said "much of the Iran-based headline risk may already be priced into the price of oil."
However, in the unlikely event that Iran did close the Strait to trade, oil prices would likely move higher to as much as $200 a barrel from the current $108, but only for a short time. But in a worst-case scenario, "an unlikely months-long closure of the major trade route (would be) potentially volatile for large U.S. oil companies" since so many get supply via that route. It would also threaten to push many Western economies into recession.
In any event, U.S. refiners with the capability of processing the domestic benchmark West Texas intermediate (WTI) crude oil "will benefit from higher margins as they will use a lower-cost feedstock while still obtaining the same refined product price," said S&P analyst Tanjila Shafi, citing three stocks, which are outlined below.
And Glickman said that even a modest rise in oil prices from current levels will benefit the biggest integrated U.S. oil and gas companies, three of which are also reviewed below.
As for gold, S&P analyst Leo Larkin argues that "investing in select gold companies under a scenario of a European embargo of Iranian oil could be a better bet than black gold."
Larkin predicts that gold will reach $1,900 per ounce by year-end, a 6.3% premium.
"On a fundamental basis, I remain positive on the gold industry in 2012. With the Fed and other central banks committed to a zero interest rate policy on short-term money, the opportunity cost for holding gold is nil," he said, and another positive going for it is as an inflation hedge.
Larkin cites three big gold miners that he says are likely to prosper with the rising price of gold. They are summarized below. He also said investors looking to diversify their gold holdings should consider gold exchange traded funds (ETFs).
three gold-mining stocks and six oil stocks that S&P Capital IQ analysts say will likely benefit from the current world oil supply scenario: