Oil's rally continued overnight, albeit at a gentler pace than the previous session. Oil markets continue to dine out on the unilateral production cut by Saudi Arabia, with the Democrat's win in Georgia adding a stimulus side dish, with the extra benefit of the US Dollar being unmoved as US yields edged higher.
Brent crude rose 1.20% to $54.15 a barrel, and WTI rose by 1.40% to $50.50 a barrel, consolidating its break above the $50.00 mark. Oil futures markets have been notable for the increasing backwardation in the calendar spreads since the Saudi announcement, a bullish factor that will support oil prices on dips from now on. The rally has continued in Asia, with Brent crude rising 0.90% to $54.65 a barrel, and WTI rising 0.80% to $51.00 a barrel.
With supplies now being squeezed, both contracts have every chance of maintaining their impressive two-month price gains, as the world recovery continues to accelerate. Brent crude's next target is $60.00 a barrel, with only a retreat through $50.50 a barrel calling the rally into question. WTI, having broken through the $50.00 a barrel barrier, should now target $55.00 in the weeks ahead. Critical support is distant at $47.00 a barrel. However, I suspect that if Brent crude reaches $60.00 a barrel, Saudi Arabia will call time out on further cuts, not wishing to allow US shale a window of opportunity to get back into the game at scale.
Gold prices torpedoed by US yields
Gold tumbled overnight, falling as low as $1900.00 an ounce on its way to a 1.60% loss for the session, finally closing at 1919.00 an ounce. Gold found itself in a perfect storm, most especially the tightening of US 10-year yields, to which it is very sensitive. The unwinding of Georgia election-related risk hedges added to its woes, as well as the inevitable culling of speculative longs late to the party.
As stated previously, I expected gold to trade in a noisy $1910.00 to $1960.00 an ounce range ahead of the Georgia runoff, and I expect that range to broadly hold now into Friday's Nonfarm Payrolls. The direction of US 10-year yields will be the critical component, with a continuing move higher, in yield term, likely to cause more soul searching for gold.
Gold has clear technical support at $1900.00 an ounce, and $1895.00 an ounce, the 100-day moving average. The latter remains critical support, and failure on the close signals a deeper correction lower. A series of highs between $1965.00 and $1975.00 an ounce denotes initial resistance, followed by $2000.00 an ounce, where I expect heavy option-related selling to cap gains initially.
Bitcoin feasts on anarchy
The actions of the Washington DC protestors overnight were meat and three vegetables to Bitcoin aficionados, and for once I cannot argue. Bitcoin dined out on the Washington DC chaos rising 8.26% to $36,850.00 overnight, a new record high. That record has quickly broken today, with BTC/USD leaping another 1.92% to 37,520.00 this morning.
Although I continue to shout hopelessly from my soapbox that Bitcoin is a tradable asset, and not an investible one, I will not argue with momentum and doom theory FOMO. With impeachment talk running around Washington DC, and a seeming avalanche of immediate resignations from his staff, the President’s actions may yet have consequences. A Democrat debt orgy and ensuing dollar debasement narrative is helping things along nicely. That is as fertile a ground for Bitcoin as any, and new all-time highs from numbers plucked out of the sky seem inevitable. Just please don’t put your pension money in it.