Oil and gold rally on weaker dollar, bitcoin party continues

Oil plows higher on vaccines, inventories

Crude prices have been unstoppable the last several weeks as vaccine rollouts begin, oil inventories are starting to come down, Asian demand remains robust, and the dollar slide propels commodities higher across the board.  A relatively quiet night on the oil front has energy traders continuing to ride the generally broader risk-on environment.

The only thing that could get in the way of oil’s rally is if any problems emerge with the coronavirus vaccine rollouts.  Transportation issues and some slowness in getting people vaccinated may start to raise doubts that a return to pre-pandemic life will happen by mid-fall.

If Congress can get a virus relief bill done this week, that might be the last catalyst needed to help WTI crude make a run towards the USD50 level.

Gold surges on Fed

Gold prices are soaring as widespread dollar weakness accelerates thanks to the Fed’s commitment to keep the stimulus coming.  The dollar is in freefall again since QE is not going away until “substantial progress” is made with the labor market and inflation goals.  Gold traders initially got faked out following the Fed statement, which did not deliver any increases to asset purchases or adoption to yield curve control.

Gold is also battling Bitcoin’s massive bubble that is stealing away some longer-term bets.  Gold’s path higher is clearly not going away as unprecedented stimulus will remain in place to fight off the winter wave of COVID and once we are on the other side of pandemic, inflation may quickly return.

Bitcoin barrels higher

Bitcoin’s momentum strategy is not going away anytime soon as the world’s largest investors place medium to longer-term bets.  Hedge funds who have resisted Bitcoin can no longer and need to show their investors that they are not missing out on what has become the best trade for the fourth quarter.

A sustainable level for Bitcoin to hit before the end of the year is the USD25,000 level and possibly USD30,000 by the end of January.  Bitcoin will continue to benefit from the prospects of more monetary and fiscal stimulus, but volatility will remain heightened.  The world’s largest cryptocurrency should have a strong first half of 2021, but the outlook might change once the world is ready to ease up on stimulus efforts.

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.

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 TradeTheNews.com, 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