Oil and Gold slightly higher, bitcoin eyes USD 40k

Oil rises on OPEC deal

Crude prices are slightly higher despite a broadly stronger dollar as energy traders’ positioning play tug-of-war over looming global lockdowns and not wanting to be against the Saudis.  The short-term crude demand outlook continues to deteriorate now that virus concerns have returned to Asia.  Vaccine rollouts have disappointed but that is being offset by positive news that more vaccines appear poised to get the greenlight.  Sinovac’s COVID vaccine proved to be 78% effective in a Brazilian trial and that is great news for emerging markets.  If by the end of the first quarter the world has over five Covid vaccines being distributed, oil prices will be able to shrug off most of the short-term pressures on crude demand.

The gold market is caught deep inside ‘no man’s land’.  One session, gold is lower as yields rise alongside with the dollar, then the next one has gold bouncing back on the reflation trade.  A Blue Wave was supposed to propel gold higher but excessively bearish dollar positions are getting covered and that will be a short-term headwind.

Gold is also seeing many institutional investors hop on the crypto bandwagon.  The bitcoin bubble is attracting tremendous widespread interest and that will hinder some of gold’s longer-term appeal.  Eventually, cryptocurrency volatility will go both ways and that should bring many traders back to gold.

Gold is consolidating between USD1900 and USD1950 but eventually, the prospects of more monetary and fiscal stimulus should have the bullish trend reassert itself.

Bitcoin rolls higher

Investors continue to hop on the cryptocurrency train which appears to be gaining more interest now that the US economy is poised to deliver more stimulus in Biden’s first 100 days.  Bitcoin continues to make fresh records and is currently eyeing the USD40,000 level.  High-frequency trading systems may look to lock in profits if the rally loses momentum around the USD41,500 area, which is the 200% Fibonacci expansion level of the near bear market collapse from earlier in the week.

The stimulus driver for bitcoin is not going away anytime soon as Covid updates around the world show virus mutations and a slow vaccine rollout will force further restrictive measures globally, including Asia.  Japan and China have cases heading in the wrong direction, while the situation across the US and Europe remain dire.  Bitcoin is surging higher as rising Covid infections only means that governments and central banks will continue to remain aggressive with fiscal and monetary stimulus efforts.

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