Oil steady, gold under pressure

Profit-taking kicks in for oil

It’s been some month for oil, with three vaccines and various assurances from OPEC+ triggering a 35% rebound just as prices were getting into dangerous territory. It seems some profit-taking is finally kicking in today as we ease into the end of the week. With WTI holding above USD45 and Brent having touched USD49, it seems crude is through the worst of its post-summer troubles.

Of course, should the winter surge of Covid-19 surpass even the more pessimistic expectations, which is highly plausible as families gather during the festive period, the near-term outlook may deteriorate.

And then we have the planned production increases in January. Will producers be as keen to postpone or reduce these as they were a month ago or will they roll the dice? The bigger players are not averse to a gamble. I mean, they embarked on a price war early in the pandemic, in what turned out to be a horrific miscalculation on their part. Will they play it safe this time around?

Gold under severe pressure

Gold is hanging on in there around USD1,800 but the yellow metal isn’t exactly seeing much in the way of a corrective move, despite having fallen more than 8% since the first vaccine announcement. This doesn’t bode well for the near-term outlook for gold, with the next support area below falling around USD1,750-1,760.

With gold appearing to have broken its association with risk markets after being well aligned for much of the year, the end of the year will be extremely interesting. Higher US yields are clearly holding it back but there remains a strong argument for a bullish gold outlook, particularly early next year. I guess we’ll soon see just how much appetite there is for discounted gold heading into the festive period.

The plunging elevator of bitcoin

Bitcoin is giving us a timely reminder of the two-way risk that comes with volatile cryptocurrencies. And while the old saying goes that markets tend to take the stairs up and the elevator down, with cryptos those stairs are steep and the elevator plunges. Bitcoin is down a modest 8% today, having recovered from earlier declines closer to 14% and more than 16% from yesterday’s peak which was just shy of all-time highs. This is likely the catalyst behind some profit-taking.

Having wiped out 9 days worth of gains in only 6 hours, bitcoin bulls sniffed a bargain. Crypto trading is a high-risk sport, which speculators in the space will be more than used to by now. And while I wouldn’t be surprised to see another plunge in the price, I equally wouldn’t be remotely shocked to see record highs in tomorrow’s headlines. Bitcoin is back and as volatile as ever. And it’s only just getting going.

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