Oil rally continues, gold consolidates

Oil creating OPEC+ buffer

Oil prices are back at levels not seen since earlier in the pandemic, when the market was contending not just with brutal national lockdowns around the globe but also a price war between two of the world’s largest producers, and now leading allies in the OPEC+ cartel. With Brent now within a whisker of USD50 and WTI above USD45, producers will feel a lot more comfortable with the balance of the markets, as traders begin to factor in a vaccine-induced spike in demand.

The question now becomes whether members of the OPEC+ group will still consider postponing output increases in January, given that prices have rebounded more than 30% from the levels that were making them anxious. Of course, the rally could also be factoring in a delay and the group will want to be careful not to cause a negative shock in the markets but at the same time, they have a healthy and growing buffer and further gains could well be on the cards.

Gold consolidating at USD1,800

Gold prices are a little flat today but the yellow metal continues to hover around USD1,800 support having only broken below USD1,850 a couple of days ago. It’s been at risk of such a correction ever since it plunged on the Pfizer vaccine news and the announcements from Moderna and AstraZeneca since then have only piled further pressure on it.

We may be seeing the re-establishment of gold as a safe haven, with the correlation with stock markets now well and truly broken. A steepening yield curve is the main culprit despite the dollar not performing particularly well. That may make life challenging in the short-term for gold, depending on how the Fed responds.

Bitcoin is such a tease

Bitcoin is teasing us now, coming within a whisker of new highs yesterday, only to pull back as profit-taking once again kicked in. Perhaps today is the day. The question is whether new highs will be the catalyst for another explosion higher, at which point, how far can it go. Back in uncharted territory, bitcoin has previously shown an ability to make staggering gains in a short period of time. It will certainly be an interesting watch.

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