Oil consolidates on OPEC, gold dips

Oil pulls off highs

Oil prices have pulled off their highs but are continuing on a positive trajectory after WTI broke above USD50 for the first time since late February. Safe to say OPEC+ surpassed market expectations and are reaping the benefits as crude extends gains. It was looking overextended going into the meeting and talks going into a second day didn’t look a promising signal.

But Saudi Arabia’s cut has had a big impact and could keep crude prices above USD50 in the medium term. Of course, we will see some profit-taking soon enough and USD49-50 will likely be tested but even a temporary move below, should it happen, won’t change the medium-term outlook. The group has shown it is committed to keeping oil prices higher and followed words with action.

Gold lower on USD recovery

The dollar is enjoying a modest recovery today which is weighing on gold. The yellow metal broke convincingly above USD1,900 earlier in the week and quickly gathered momentum. It then ran into resistance around USD1,960, the 61.8% retracement of the move from the all-time highs to late November lows.

This may just represent a little profit-taking though, with the first test now being USD1,900 from above. A move below here could just mean a slightly deeper correction as the dollar enjoys a little reprieve. With US 10-year yields above 1% at the prospect of more stimulus, confidence in gold may well depend on yields not continuing the upward trajectory on fear of more inflation and earlier Fed tightening.

Bitcoin just keeps going

Bitcoin is once again making new record highs today and showing little sign of running out of steam. It just seems a question of when it will hit USD40,000, rather than if, and you could say the same about v50,000. Rallies like this that are driven by FOMO alone, with loose logic applied later aren’t sustainable but they can certainly produce extraordinary returns in the meantime. When it was closing in on USD20,000 for the first time, it did not feel like this was a rally in the late stages of its cycle but that was a whole three weeks ago. Prices have now doubled and that’s quite ridiculous. It still doesn’t feel like the rug is about to be pulled out but I’m no longer quite so confident. I think USD50,000 could be a major test and let’s face it, another 25% rally in bitcoin is nothing. When it falls, it’s going to hurt, we may have to wait a little longer yet.

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