Oil drives higher, gold retreats, bitcoin in recovery

Oil rally continues but may face resistance soon

Oil’s relentless rally is continuing, with crude prices up roughly 1.5% today, making fresh highs since the pandemic plunge. The rally will run into stronger resistance soon enough but a softer dollar is giving it an additional lift today.

I do wonder how much longer this has to run given the mounting near-term risks. Granted, OPEC+ has alleviated some of the downside risks from the lockdowns – which are shaping up to be stricter and longer – but we may see some profit taking as Brent closes in on $60.

There wasn’t much reaction to reports that compliance was at only 75% in December. Whatever the reason for this, traders are clearly satisfied with the recent changes to the deal and the compensation procedures that are in place to make up for any shortfall in cuts.

Gold continues to look vulnerable

A softer dollar isn’t providing much reprieve for gold today, which continues to look vulnerable after Friday’s plunge. We’ve seen a modest bounce back over the last couple of days but it’s been quickly driven lower again, with gold moving back below $1,850 and a run at $1,800 looking increasingly likely.

The dollar may have run out of steam a little today but it’s made impressive gains the last few sessions and US yields are continuing to trend higher. The common message from Fed policy makers so far this week appears to be one of optimism on the outlook which is likely aiding the moves we’re seeing in US yields. This could continue to be a near-term downside risk for the yellow metal.

Will bitcoin enthusiasts be rewarded for unwavering belief?

Bitcoin has enjoyed a little reprieve the last 24 hours, rebounding a modest 10% after falling hard at the start of the week. The cryptocurrency remains around 15% from its peak on Friday but enthusiasts will no doubt be encouraged by what we’ve seen after the plunge. That said, when are they not encouraged?

I suspect they’ll probably be rewarded for their unwavering belief in the near-term. What we saw was not the crash many have warned off, more a reminder of the risks associated with bitcoin and other cryptocurrencies.  And a harsh lesson at that. But as the FCA warn, when it comes to cryptos, you should be prepared to lose everything. As with any form of speculation.

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