2020-12-27 • Updated
Do you remember last December? Back then, there were halfway solved uncertainties related to the US-China trade deal and long-lasting disputes over the post-Brexit relations between the United Kingdom and the European Union. With plenty of this and plenty of that, the gold was still higher than in 2019. Now, let’s go back to the end of our officially confirmed worst year of modern history. Who thought that everything could be even more uncertain and trigger a slowdown of major economies? The outbreak of Covid-19 has messed everything up. It made the Fed start a new round of quantitative easing and pushed the US regulator to cut the interest rate close to zero. As a matter of fact, the king of reliability – the US dollar has weakened. At the same time, the king of stability – gold has surged to new highs. 2020 was indeed a magnificent year for metals, especially for gold. What do analysts expect from the upcoming year? Will the gold shine brighter?
The worsening situation with new coronavirus across the globe pushed the yellow metal above the all-time high of 2011 and marked a new high at 2 074 in August. Since then, the precious asset has corrected on the improving risk sentiment. On Christmas, December 24, it closed near the 50-day SMA at the key resistance of 1 880. The next near-term obstacle for buyers lies at the descending trendline at 1 900. The breakout of it will increase the chances of reaching 1 930 and 1 960. For sellers, key support points are placed at 1 820 (200-day MA) and 1 760.
Of course, one of the biggest questions for traders is whether the gold will make a new high or form a new downtrend. The answer depends on three main issues. Firstly, how successful and quick the distribution of anti-covid vaccines will be. The vaccination process has already started in many countries, but some vaccines have not been tested in a real environment and may provoke allergic reactions. Another issue is mutations of a new virus, which can be even more dangerous. Finally, the third issue is the economic situation in the biggest countries. If the economies recover quicker, the gold will fall down.
According to Capital Economics, the existing problems will still add pressure to the gold in 2021. As a result, the upside momentum will be limited by 1 900 level. As for Goldman Sachs, its potential target for gold lies at 2 300. The reason for that is the possibility of higher inflation after post-coronavirus recovery.
Analysts turn their heads to the silver market, too. Silver has risen greatly from March’s lows at 11.28 to the 2013’s levels at 29.78. Since September, the metal has been consolidating between 25.6 and 23.5 levels. On December 24, the key resistance for silver lied at the descending trendline at 27.4. The next one is placed at 28.4. As for support, the first one was placed at 23.5.
According to the Canadian Bank CIBC, silver will rise as high as 32. Bank of America is bullish as well, as it sees silver jumping to 31! Analysts at Metals Focus also see silver prices pushing well above $30 an ounce next year. All in all, a bullish year for silver is expected.
It's not a secret that metals depend on the economic situation and risk sentiment. Keep in mind that if there is negative news on vaccines, coronavirus, or other disappointing events, the metals will likely rise.
China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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