Trump signature boosts oil and gold

Oil markets are modestly lower

Oil markets headed south early this morning, on fears that the US stimulus and government funding measures would fall at the last presidential hurdle. With President Trump signing the bill, oil has quickly recouped most of its losses today, although both Brent and WTI remain modestly in the red.

Brent crude is just 0.35% lower at USD51.15 a barrel, and WTI is 0.40% lower at USD48.10 a barrel. With trading volumes thinned by the holiday week, oil is likely to remain below the radar in the coming days. That said, the signing of the US stimulus bill, with the possibility of an increased size, should put a floor under oil prices in a shortened week.

Brent crude has resistance at USD52.50 a barrel, and only a failure of USD49.00 a barrel suggests that a deeper correction could occur. WTI has resistance at USD49.20 barrel, and only a loss of USD46.00 a barrel imperils the longer-term rally.

 

Gold rises on the Trump signature

Both gold and silver have enjoyed a strong start to the week as US funding and fiscal stimulus packages were signed into law. That has seen an immediate fall in the US dollar, which has seen gold rise 0.85% to USD1895.00 an ounce, and silver leaping 3.0% to 26.5980 an ounce. It should be noted that trading volumes are thinner than usual this week, and that moves are prone to exaggeration in that environment.

The gold/silver, or “mint” ratio has also fallen this morning by 2.20% to 71.20. Admittedly, the fall has been exacerbated by the move higher in the less liquid silver side of the ratio. However, the mint ratio is now once again within shouting distance of last week’s low at 69.50. A daily close below that level would be a bullish technical development for gold and silver, implying that further meaningful gains lie ahead.

Gold has risen to USD1895.00 an ounce today, just below initial resistance at USD1898.00 an ounce, its 100-day moving average (DMA). That is followed by USD1917.00 an ounce, last week’s highs. A rally through USD1917.00 an ounce opens the road to more gains to the USD1960.00 an ounce region. Support lies at USD1870.00 an ounce, and only a failure of support at USD1855.00 an ounce suggests that gold has fallen back into its previous USD1820.00-1880.00 an ounce range.

 

Bitcoin

Bitcoin continued its quest to be regarded as a “mainstream financial asset” by rising over 16.0%, including 3.45% today, during the Christmas break, when the rest of the world was opening presents and overeating.

The latest bout of great rich quick, it’s all “institutional money”, Dutch tulip FOMO-mania appears to have been a rise through the previous resistance around USD24,000.00. That seems to have triggered stop-loss buying, which in turn, dragged in even more ‘momentum’ buyers, creating a self-perpetuating bullish storm.

The signing of the stimulus bill today by President Trump appears to have prompted the latest rally, as Bitcoin-ista’s price in another round of dollar weakness, which surprisingly, I agree with.

While I am sure the bonfire of Bitcoin will be brutal when it comes, as people who should know better refuse to differentiate volatility from reality, I cannot argue with the momentum. Bitcoin has resistance at USD28,000.00, but I suspect that will present no great barrier, such is the desperation of the FOMO Bitcoin-istas to make their USD30,000.00 dream come true. You could also say to yourself that Jeffrey Halley is turning bullish on Bitcoin and race for the sell button. Nothing would make me happier.

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.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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