Oil up on vaccine hopes, gold rebounds

Oil buoyed by recent supply and demand developments

Oil prices are continuing to bask in the glory of Pfizer and BioNTech’s early success, with Brent and WTI up more than 1.5% on the day and not far from the post-summer highs. Both contracts were in tricky territory less than two weeks ago after spiralling almost 20% as Europe went back into lockdown.

Since then, the soothing words of Alexander Novak and yesterday’s vaccine news have seen crude prices bounce back strongly and for the first time in a while, there may be a bullish case building. That said, surging Covid cases poses a major near-term risk for global growth which may necessitate OPEC+ pushing back planned production increases slightly if they want to sustain these levels. Throw in some more positive results from AstraZeneca/Oxford, Moderna and GSK/Sanofi, and OPEC+ may decide to push ahead as planned.

Gold could break three-month lows

Gold is enjoying mild relief today but remains not far from the bottom of its three-month lows. The yellow metal came under considerable pressure yesterday as US yields jumped on the vaccine news, offering hope of an economic recovery next year. That’s pushed gold back to its lows and should that optimism continue in the coming weeks, maybe even backed up by some other positive vaccine data, USD1,850 may be lost.

Beyond that, I still think gold is bullish longer term. We’re back in monetary stimulus season and the Fed and ECB are expected to follow up in December, with governments also being forced into loosening the purse strings further. This could pressure the dollar in 2021 and be another supportive factor for gold.

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