Oil prices falls, gold showing volatility

Oil prices lower on Covid

Crude prices are declining as COVID-19 rages on and as energy traders shift the focus from vaccine optimism to vaccine execution.  The big cities in the US are getting hit hard again by the virus and that could translate into longer lockdowns that will deliver a bigger hit to fuel demand over the next couple of months.  Vaccine implementation across the US and Europe will be key for how quickly the crude demand outlook improves next year.  Today was a big day as the UK became the first western nation to start COVID vaccinations for its population.  The US is expected to start after the FDA’s review at the end of the week.

WTI crude’s outlook is still for significantly higher prices next year and that is probably why we won’t see any major pullbacks.  The COVID-19 impact on oil and gas CAPEX will deliver supply shortages at some point next quarter and that could be the catalyst to help oil break out of its trading range.

Gold could face bumpy road upwards

Gold trade is getting volatility as safe-haven flows remain steady on virus angst, but stimulus prospects remain mixed.  The coronavirus over the past week has delivered some of the deadliest days in American history adding to pressure for Congress to act.  The full impact from the Thanksgiving surge will be found out over the next week, with the likelihood of more lockdowns and restrictive measures becoming the base case.  A few months of terrible economic activity during a peak period for many small businesses could lead to deep scarring from bankruptcies.

The dollar is a tad firmer today, but that has not really gotten in gold’s way.  Gold is itching to get back above the USD1900 level, but it may need to see Senate Majority Leader McConnell offer an olive branch to Democrats.  Democrats have already come down from an over USD2 trillion stimulus proposal to roughly USD900 billion.  Gold is ready to rise even further, but it may struggle until the stimulus stalemates show some signs of ending.

Bitcoin slips lower

Bitcoin continues to struggle to break the USD20,000 level.  Yesterday, MicroStrategy’s proposed private offering of USD400 million of convertible notes was another vote of confidence for Bitcoin.  MicroStrategy intends to invest the net proceeds of the sale in bitcoin.  Today’s risk-off session on Wall Street is dragging Bitcoin down and momentum selling could grow on the break of the USD18,000 level.  Bitcoin’s institutional interest is eyeing a bigger move higher, but the short-term outlook is starting to look dicey.

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