Oil prices are quite steady today, in keeping with how they’ve traded for most of the week. A lot of good news has been priced into crude at this point, including last week’s OPEC+ deal that will see output gradually rising from a lower base from January, ensuring the market won’t become flooded with oil as the global economy suffers until the weight of the winter Covid surge.
Recent vaccine news has continued to be supportive for oil prices, with WTI holding above USD45 and Brent still flirting with USD50. FDA approval for the Pfizer vaccine now looks a given, potentially as early as tomorrow, which will be a major boost, albeit one that is basically priced in at this point. More approvals around the world for this and others though may squeeze a few more drops out of the recovery trade.
Gold is seeing some profit-taking today after a great start to the month. The yellow metal rallied more than 5% as the dollar continued to struggle and stimulus talks progressed. The next week will be very interesting for gold, with the ECB announcing its latest monetary policy decision tomorrow and the Fed doing the same next week. More stimulus is surely on the cards for both, it’s just a question of how much with both economies facing an extremely challenging winter.
The yellow metal forced its way through USD1,850, peaking around USD1,875, before profit-taking kicked in. While the prospects for gold may be good if the Fed and ECB overdeliver, I do wonder if we’re going to see a little more downside in the near-term. Gold may have bottomed out for now but we could see some near-term softness, after which it could enjoy some upside once again.