Oil eases lower, gold eyes 1900

Oil facing major resistance

Oil prices are easing off a little today after extending gains on Thursday, taking the rebound since early November to more than 40%. It’s taken a lot of positive vaccine news including the initial rollout of one – the second won’t be far behind – and a new deal on production for next year among OPEC+ to get it to here but it’s certainly reaping the rewards.

Crude prices are entering into potentially tricky territory now though, with USD49-50 level in WTI having historically been a very important area of support, before turning resistance earlier this year. It also represents something of a psychological barrier which, if overcome, would represent a very bullish move.

Given the near-term risks to the economy from Covid-19 as more and more countries reluctantly embrace lockdown once again, I do wonder whether we may see some profit-taking just below this major level in oil. The next month or two could be extremely challenging as the first vaccines are rolled out and lockdowns – perhaps the last – look inevitable in January, at least.

Future bright for gold

The future is looking bright for gold after it added to gains this week, even as the Fed opted against fresh stimulus measures. While the central bank did commit to purchases for longer, which does represent an easing of sorts, it didn’t go as far as a number of other central banks over the last couple of months, despite the country going through a grueling wave of Covid-19 at the moment.

Traders seem comfortable with their decision though – aided by their upbeat economic assessment – with the dollar slipping, longer-term yields remaining steady and stock markets back in record territory. This has enabled gold to take a run at USD1,900 once more this week and while it failed at the first attempt, I doubt it will be the last. This remains a very accommodative environment and one perfectly suited to the yellow metal.

Bitcoin back to its volatile best

Bitcoin is ending the year on a high after breaking USD20,000 for the first time ever on Wednesday. It was clear this was going to be the catalyst for another surge and that’s exactly what we’ve seen, with the crypto surpassing USD23,500 within 24 hours of it happening. And I’m not sure it’s done there. The next near-term target is USD25,000 and there’s nothing to suggest we’ll have to wait long to see it. Bitcoin really is back to its volatile best and it’s bringing its peers along for the ride.

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