Gold falls, oil rises on vaccine news

Gold getting whacked as US yields rise on vaccine news

The dollar isn’t faring too badly and is actually a little up on the day despite having widely been adopted as a safe haven asset. This is very much not a risk-averse day but it seems it’s the yen that’s taking the brunt of the hit, while risk currencies are doing very well.

Interestingly, gold is getting whacked in the wake of the vaccine news. US rates are rising on the back of the announcement and that’s bad news for the yellow metal which has fallen as low as USD1,900, having traded above USD1,950 ahead of the release. Investors now clearly betting on a stronger economic recovery and everything that comes with it.

Perhaps we’re now seeing a bit of a reset moment for gold, where its correlation with risk assets starts to fade and it returns to its traditional roots as a safe haven instrument. Although this may be a little premature at this stage.

Oil prices surge on vaccine outlook

Oil prices are soaring on the back of the vaccine announcement. Brent and WTI have jumped 6% on the announcement, taking gains for the day to almost 10%. WTI now finds itself back above USD40 for the first time since 23 October, while Brent nipped above USD43 before paring back slightly.

Oil has had an absolutely horrific year with the pandemic hammering demand and, at one point, pushing crude prices negative. Well, that may now change with a vaccine providing a sustainable solution to an utterly horrific problem that has caused carnage across the globe.

Whether the vaccine will come soon enough to warrant pushing ahead with production increases in January is another thing. Producers have plenty of cause for playing it safe but if vaccine news between now and year-end returns prices back to more sustainable levels regardless, they may find there isn’t as much desire to postpone increases as there was a week or two ago.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam