Oil rises, gold shines

Oil

Crude prices got an unexpected boost from a surprising Bank of Japan decision to shift their policy which sent the dollar tumbling. ​ Oil should be higher, but China’s COVID surge has energy traders refraining from betting on a quick complete reopening. ​ The oil market has tremendous support at the $70 level as the US will likely be refilling the Strategic Petroleum Reserve for a while. ​

The outlook for China’s crude demand will hinge on how quickly China can bolster up its health care system and over how bad this wave gets. ​ It is hard to believe that if the COVID situation deteriorates much worse than feared that Beijing might have to deliver a U-turn over its policy. ​

Gold

Gold got an unexpected present from the Bank of Japan. ​ Gold is benefitting from a weaker dollar after the BOJ tweaked their curve policy, which signaled they are nearing the end of its ultra-easing monetary policy stance. ​ It is rare to see gold perform so well when global bond yields are surging, but this widening of Japan’s yield curve band signifies that we could have a peak in the dollar put in place. ​

The dollar might be in the house of pain for a while and that should be good news for bullion. ​ Holiday trading volumes might disrupt this rally but for now it seems like gold has definitely got its groove back. ​

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