Significant price changes have been observed in recent days on the oil market and on the gold market. The oil increased to the highest level since March 2020 and the gold fell to the lowest level since July 2020. These changes may result from a decrease in fears of future epidemics due to the use of effective vaccines.
The price of oil seems to be rising for the fourth week in a row. At that time, the rate of return has already reached almost 30 percent, and the currently observed rally looks like the one in April. The market seems to live up to the fact that the use of the COVID-19 vaccine will lead to a rapid recovery of global demand for fuels next year. By that time, OPEC+ countries may, in turn, keep production low by extending current production limits. Currently, the price of a barrel of WTI oil is over 45 USD.
The Bank of America forecasts that it may rise to USD 60 in summer 2021. The argument is to ease travel restrictions, which will increase demand for fuels, Bloomberg said. Goldman Sachs Group Inc., in turn, indicated in a report that it expects OPEC+ to delay the planned production growth of 2 million barrels per day by three months. Goldman Sachs forecasts that oil will cost an average of USD 47 per barrel in the next quarter.
It seems that the same information that has supported oil prices could have led to a fall in prices on the gold market. In the last three weeks, gold has been down by over 7%, reaching its lowest level since July. It seems that some investors who were in a hurry to buy gold as a safe haven in times of uncertainty, along with information about vaccines, began to leave it. The record outflow of capital from the gold market may prove it. The SPDR Gold Trust – the world's largest gold ETF with a market capitalization of $71.5 billion – has recorded an accelerated rate of redemptions in recent weeks.
Thus, the gold market could leave the hot capital that appeared on it only due to the epidemic and now we may return to the fundamentals in the form of inflation expectations, bond yields or simply gold supply and demand. From the technical analysis point of view, the current decline may only be a corrective move after a very strong upward trend.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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