Oil steady, gold drops close to USD1800

Oil has sights on summer peak

Vaccine news has been very kind to oil prices and the AstraZeneca/Oxford announcement was the catalyst for them finally breaking above post-summer ranges after multiple failed attempts. Brent and WTI both now have their sights set on the summer highs around USD47 and USD44.50, respectively.

A move above here takes us back to levels not seen since early in the pandemic when Saudi Arabia and Russia engaged on a bizarrely timed price war. With the two countries now back on the same team, the question becomes what OPEC+ will do in January.

Planned production increases of two million barrels – reducing cuts to 5.7 million barrels compared to before the pandemic – looked off the table earlier this month. Given the recent rally in prices, producers may be tempted to push ahead on the belief that vaccine news and a stronger demand recovery will sustain prices at acceptable levels.

Too soon to write off gold

After finally plunging through USD1,850, the gold sell-off has accelerated as stops fell and gold bulls bailed. This doesn’t bode well for the yellow metal in the near-term but I’m not convinced the good times are over. There’s still an enormous amount of stimulus in the system and the Fed, ECB and US government should add more soon enough.

This should be good news for gold, while the dollar continues to languish near its lows. Yields are continuing to rise in the US which is a drag on gold as investors continue to price in a stronger economic recovery. That may be challenged in the coming weeks as states continue to impose harsher restrictions.

Rally stalling but new highs could be a huge catalyst for bitcoin

The bitcoin rally may be running out of steam but I’m far from convinced it’s run its course. It’s only natural that we’re seeing a little profit-taking near the all-time highs but we’ve seen the herd behaviour in the crypto space before. Should new highs be made in the coming days, the price could take off and we’ve seen the kind of moves it’s capable of when that happens. Bitcoin remains a very unpredictable asset and even at this stage, predicting end of year levels is about as speculative as it gets. One thing is for sure, it’s not a boring instrument so I imagine the headlines are only going to increase and that has historically been good news for cryptos.

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