Oil holds gains on OPEC+ commitment

Oil steady as Saudi Arabia cuts output

Oil prices are holding onto gains after WTI broke above USD50 this week on the back of the OPEC+ production agreement. The group – well, Saudi Arabia – went above and beyond what the market expected and the price reflects this. Crude prices were looking a little overextended going into the meeting but the outcome has spurred new momentum.

Saudi Arabia is clearly fully committed to supporting oil prices through these turbulent months and has no desire to risk another price collapse in the pursuit of short term gains. As well, Russia’s determination not to lose market share has been taken into consideration, meaning the two big players have got what they want out of the deal. It’s not a solution that’s sustainable in the long term but it’s a decent plaster to see the group through this severe – and hopefully final – wave of Covid-19.

Gold plunges as yields continue rising

Gold prices have stabilized a little over the last couple of hours after initially smashing through USD1,900 early in the European session. The move came as we saw a similar jump in the US dollar which started trending gradually higher yesterday.

This may well just be a bit of a catch-up move, with yields having risen all week following the Democrats’ victory in Georgia which gave them control of the Senate and completing the clean sweep. The promise of more stimulus could mean more inflation and interest rates rising earlier than otherwise expected. The dollar and gold have very much lagged behind in the response.

There will likely be a technical element as well, with it having taken so long to break USD1,900. A move back below may have triggered a bunch of stops which would typically exacerbate the move. It also came after the yellow metal failed to break the 61.8 fib around USD1,960, which would have been bullish. The question now is whether this marks the end of gold’s bull run or if there’s more to come. The USD1,840-1,860 region could be key on this front.

Bitcoin getting silly now, but will probably keep going

Bitcoin has broken USD40,000 less than a month after breaking USD20,000 for the first time ever and it’s showing no signs of slowing down. We are very much in speculative bubble territory now and while I don’t think it’s done, it’s becoming increasingly likely that it’s going to get messy, as there’s no logic behind what we’re seeing. It’s pure speculation and FOMO and that never ends well. I previously said I wouldn’t be surprised to see USD50,000 before the end of the month and I’m now thinking that was too conservative. The last USD10,000 move only took four days. It’s getting silly now.

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