OPEC reaches deal, gold itchy

Oil stabilizes after Saudi surprise

The outcome of the OPEC+ meeting was a welcome surprise for the oil markets, with Russia and Kazakhstan sharing a small increase in production of 75,000 but Saudi Arabia committing to a one million barrel per day cut. So not only will there be no effective increase but the outcome represents a substantial cut.

That saw oil prices rally strongly on Tuesday, which initially carried over into today as well, before once again paring back. With WTI still hanging around USD50, where it continues to see significant resistance, I do wonder whether this is an asset now primed for a correction of some kind.

It’s been on a remarkable run and there’s now a lot of good news heavily priced in. Given the challenges facing the economy in the coming weeks and months, near-term downside risks may soon mount.

 

Gold gives up early gains

Gold prices have seen some interesting swings on Wednesday. The yellow metal was once again rallying earlier in the session, even as US yields were on the rise and the 10-year went above 1%. A softer US dollar was likely the culprit but with US stocks softer at the time, it was interesting to see the greenback remain out of favour.

Both changed course as we neared the open on Wall Street though and the dollar now finds itself up on the day, with gold just above USD1,930 after dropping three-quarters of one percent suddenly on seemingly very little news. Perhaps the reality of the situation just finally caught up with it after a strong start to the year, with some profit-taking exacerbating the move.

A blue wave does represent a downside risk for gold given what a major stimulus package could mean for inflation and US interest rates, hence the 10-year moving back above 1%. It may be fine margins in the Senate but it’s still a majority and one the Democrats need.

 

Bitcoin rebounds a measly 25%

Bitcoin made new highs again today, this time moving above USD36,000, only two days after slipping close to USD29,000. A roughly 25% rebound when very little has happened is just what happens in bitcoin and I don’t think anyone would be surprised to see the price above USD40,000 by the end of the week, even USD50,000 by the end of the month. Where does it end?

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 SKY News. 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