Gold shines on stimulus hopes and Brexit worries, oil shrugs off virus concerns

Gold gains ground

Gold is breaking out as the Thanksgiving COVID surge appears underway. In the US, Trump’s administration delivered more sanctions on Chinese companies and the dollar resumes its slide.  This week, investors have plenty of reasons to pile on safe-haven bets, Brexit negotiations are likely to go down to the wire and possibly to the end of the week and as the US might fail to fund the government and secure a government spending bill that will get signed off by President Trump.  Fiscal aid doubts are growing, which could dent the stimulus trade for gold, in the short-term, but a deal should still be expected to get done before the holidays are over.  The Georgia Senate run-off races mean everything for the Republicans and a failure to deliver aid could motivate Democratic voters.

Gold is surging higher and could look to make a run towards the USD1900 level before the end of the week.  The week ahead has many reasons (Brexit and two US fiscal cliffs) for investors to increase safe-haven bets and should be accompanied with an ECB decision that delivers both an increase and extension to their bond buying program.

Oil looks for direction

Crude prices are initially declined as the Thanksgiving COVID-19 surge will likely trigger more restrictive measures across the US and as energy traders anticipate 2021 to be a race for oil-producing nations to increase production.  The virus situation in the US is now hammering California, Texas, Illinois, Florida, and New York, and that will not help Republicans deliver more state and local aid needed to break the stimulus relief impasse.  The third wave of the coronavirus in the US is seeing a strong spike across many blue states and that might complicate stimulus negotiations.

What will make it difficult for the oil market to find balance early next quarter is the eagerness for many countries to bring production online.  Norway’s oil ministry stated they have no plans to curb oil production in 2021, which should come as no surprise after last month’s SSB (Norwegian statistics bureau) survey showed oil and gas companies have raised their investment plans recently.

WTI crude’s vaccine-led rally was due for a pause and will likely struggle until we see strong acceptance for the vaccine across the UK and US.  The public concern of safety over vaccines could produce some downward pressure on crude in the short-term.  Recent Gallup polls suggest the public is warming up to the idea of taking the Moderna or Pfizer vaccine, but the news is not all positive.  In NY, 55% of FDNY members are resistant to the idea of getting a COVID vaccine.  The next few months will be very difficult to monitor the virus situation across the globe and that could keep crude prices elevated but stuck in a trading range.

Crude prices have turned positive as risk appetite attempts reassert itself.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya