Oil lower as OPEC deal remains elusive

Crude prices remained heavy after OPEC+ had to postpone their meeting a few days to allow more time for energy ministers to reach an agreement. The last time OPEC+ failed to reach a deal was in March, before the historic plunge, so producers are not taking any chances and allowing a few days to break the impasse.

Before the meeting, the consensus was that OPEC+ would deliver a 3-month extension to oil production cuts, but compliance issues and rising US production have put an end to that notion.  Some OPEC members oppose delaying an output hike and it seems that the logical solution will be for only a one-month extension of the production cuts and for a new plan to force countries to compensate for excess production.  OPEC+ doesn’t want to give US oil companies a three-month head start to ramp up production as the global economic recovery thrives in Asia.

Gold stabilizes after recent slide

Gold is licking its wounds and starting to make a comeback.  Gold did not stand a chance with Monday’s vaccine news from Moderna that signaled we are getting closer to preventing the spread of COVID-19.  Moderna’s latest vaccine data confirmed its vaccine is 94.1% effective in preventing the coronavirus and is safe.  Gold has fallen over 15% since making a record high in August as a record rally with global equities have taken away the need for safe-havens.  Gold will eventually benefit from the reflation trade, but a volatile December will likely trigger a modest equities correction that should help gold rebound.

If gold continues to stabilize, a stronger rebound could be around the corner as expectations remain high that both the ECB and Fed will unveil new measures at their respective policy meetings later this month.  Gold should find tentative resistance at the $1825 level and major support around the $1750 region.

Bitcoin hits record high

Bitcoin is on fire!  Bitcoin surged to a record high as longer-term institutional bets grow, some investors prefer the digital currency over gold, and it makes progress with mainstream adoption.  Some will argue that this rally towards $20,000 will see a similar tulip-mania crash like we saw a few years ago, but in the 17th century tulip prices did not make a rebound following its crash like Bitcoin.  A safe-haven Bitcoin is not, but institutional and retail interest is strong and that could allow for bullish momentum to keep this trade going.

Volatility will remain elevated with Bitcoin and investors should be prepared to continue to see wild swings in both directions.  After another failed attempt at $20,000, Bitcoin has turned negative in early trade.

By Ed Moya