Oil up after OPEC+, Gold Slipping, Bitcoin Stable

OPEC+ puts temporary floor under oil prices

Oil prices are up a little over 2% at the end of the week, buoyed by the caveat in the OPEC+ statement that allows them to make immediate adjustments before the next meeting should they see fit once more information on Omicron is available.

The group has previously stated that winter surges were baked into their forecasts but Omicron threatens to be much more than that if it evades vaccines and the flexibility was probably necessary to keep all parties on board with raising output as planned in January. Whether it will be utilized will depend on the data in the coming weeks.

Oil may have bottomed for now, with price drops towards the lows being met with fear of an immediate adjustment. Markets have tested these warnings in the past though and I expect we’ll see just that if the evidence turns out to be concerning. Rallies may struggle to gather too much momentum in the near term as well, although positive news on the variant will be a very bullish development.

Omicron is negative for gold

Gold is steady ahead of the jobs report but continues to trade with a slightly negative undertone despite risk appetite being fragile at best and the dollar a little softer over the last week or so. A flattening of the yield curve is weighing on the yellow metal and a strong jobs report today could further exacerbate its woes.

Of course, there are multiple factors to watch at the minute as far as gold is concerned but the fact that the central bank’s hands are tied means bad news on the Omicron variant may not be as bullish for gold as it has in the past. Unless, of course, the central bank prioritizes the economy over inflation which would be a massive risk.

Bitcoin volatility will return

Bitcoin has been quite stable over the last few days as the dust has settled on the Omicron shock and traders await more information. It’s not often that bitcoin has appeared steady compared with stock markets but this is one of those rare occasions. But if the news is bad, I expect it will suffer along with other risk assets and volatility will quickly return.

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Craig Erlam

Craig Erlam

Former 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.