The yellow metal pushed above $1,930 an ounce to hit the highest level seen in months, aided by a weaker greenback after posting its best annual gain in ten years.
The precious metal recent surge has been triggered by continual declines in U.S. real Treasury yields, which boosted the precious metal attractiveness.
At the time of writing this report, gold futures were trading at $1,937 an ounce printing a gain of $42 per ounce.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on markets sentiments triggering the precious metal prices to swing up;
“With the polls shading to a Democratic sweep such a result guarantees larger stimulus checks will be mailed out forthwith, and massive U.S. infrastructure spending packages get fast-tracked through Congress in Q1. All of which is sending risk sentiment through the roof.
“But a bigger US stimulus boost cannot be good for the U.S. dollar which is already brittle and snapping under the colossal weight of the massive U.S. budget and trade deficits.”
What to expect: Still, the increased US debt load will be music to gold investors’ ears, and the Democratic sweep could offer the ultimate spark to put gold above $2000/0z.
Oil drops amid strong import data from world’s largest buyer
Oil prices are under pressure, and recent customs data reveal that crude imports into China were up 7.3% in 2020.
Oil prices drifted lower at the last trading session of the week. Surprisingly oil prices are down in spite of strong import data from China on the bias that the recent COVID-19 outbreak in the world’s largest crude oil importer has led to major lockdown measures.
What you need to know
- At the time of writing this report, Brent oil futures were down by 0.32% to $56.24 a barrel, and the West Texas Intermediate futures down by 0.11% to $53.5o a barrel.
- Oil prices are under pressure, and recent customs data reveal that crude imports into China were up 7.3% in 2020.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics, spoke on the prevailing macro conditions keeping oil prices relatively high, taking into account Saudi’s recent pledge in curbing production and the influx of COVID-19 vaccines to tame the ravaging virus in causing more harm;
“Oil prices are higher rising to a fresh ten-month high on stimulus expectation as consumers could spend a portion of the direct deposit on gasoline purchase.
“But it’s perhaps the infrastructure component of the US stimulus efforts that will resonate bigger given the current COVID19 concerns that are pushing back on gasoline demand.
“And with Saudi Arabia providing the cornerstone and bridging the gap to vaccine oil market lift-off. With the renewed enthusiasm about the US demand recovery due to the prospects for more stimulus and the new administration’s pledge to focus on the vaccinations’ rollout, oil prices are lifting higher locking to hash out higher ranges.”
What to expect; Oil traders are entering a critical phase as oil remains sensitive to the news with negative implications for the demand recovery.
- The oil market recovery is vital for blunting the effect of higher nominal US yields through the reflationary channel. If oil doesn’t fly higher, the reflation trade could fall flat on its face.
Oil prices drop, traders weigh a rising number of COVID-19 attacks
Oil traders are now weighing the ever-rising number of COVID-19 cases and the impact on global energy demand.
Oil prices dipped lower at the fourth trading session of the week, as traders are now weighing the ever-rising number of COVID-19 cases and the impact on global energy demand against a fifth consecutive week of declines in US oil production.
The number of global COVID-19 cases surpassed 90.87 million as of Jan. 12, according to Johns Hopkins University data.
What you should know
- At press time, Brent oil futures slumped by 0.16% to $55.97 and West Texas Intermediate futures edged lower by 0.15% to $52.83. Both major oil benchmarks however remained above the $50 mark.
- The oil market’s recent bullish rally took a halt as the stronger dollar and the ever-present gasoline supply overhang offset the drying up of U.S. crude inventories.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on OPEC+ intentions coupled with the world’s largest economy crude oil stockpiles’ macro:
“Oil market sizzling rally likely took a hiatus as the stronger dollar and the omnipresent gasoline supply overhang offset the evaporating US crude inventories capping both primary benchmarks under key psychological and technical inflexion points.
“Even before the not so rosy gasoline read on the US Department of Energy (DOE) report, this gnawing temporal disconnect was weighing on market sentiment with spot miraculously trading better now than they were before the pandemic.”
What to expect
- Oil is still pricing in a great deal of optimism linked to the roll-out of Covid-19 vaccines, but any negative development would prompt a sharp negative reaction.
- Still, demand will gradually improve as more folks get vaccinated, and the supply side is under control thanks to OPEC+ and Saudi Arabia’s continued efforts.
Oil prices trading at their highest levels since February 2020
Both major benchmarks traded above the $50 mark and are trading at their highest levels since February 2020.
Crude oil prices rose to their highest level since February, with the U.S crude seeing the seventh day of gains.
The recent gains in oil prices are triggered by reports of an impressive drop in U.S. crude oil stockpiles, which helped boosting oil traders’ sentiment on energy demand.
What you should know: At the time of writing Brent oil futures gained by .34% to trade at $57.34, after picking up nearly 2% yesterday. West Texas Intermediate futures rallied by 1.22% to $53.86, having risen 1.7% in the previous session.
- Both major benchmarks traded above the $50 mark and are trading at their highest levels since February 2020.
- Recent data from the American Petroleum Institute showed a drop of 5.821 million barrels in U.S. crude oil supplies for the week ending Jan. 8.
- The draw was larger than the 2.7-million-barrel draw in forecasts anticipated by oil experts as well as the 1.663-million-barrel draw reported during the previous week.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics spoke on the macros supporting oil prices at least for the near term;
“Crude oil rallied to pre-pandemic levels. Brent traded as high as US$56.75 after bouncing on a larger crude draw than expected. A weaker US dollar helped and complimented numerous price revisions by several analysts for still higher 2021 estimates on the tailwind from the surprise 1mb/d cut announced by Saudi Arabia.
“The remainder of this week’s currency action now sets up for a weaker US dollar through a droop US CPI print and via Fed Chair Powell’s dovish lens which will be oil supportive as oil is priced in dollars. This dynamic is already playing out in Asia this morning.
“While the higher oil prices story continues to make sense, I suspect China’s rapid response to the outbreak”
What to expect: Oil traders anticipate sizable scrutiny as to whether WTI over $50 will prompt increased investment or whether a conservative financial strategy prevails,” Innes added.
- Also, as money flows to where investors can make profits and the higher oil price go, not only will Shale producers be keen to turn up the taps but so will OPEC+.