Vaccine and stimulus optimism continue to propel stock markets and commodities higher, and the dollar lower. Since the first of a several encouraging vaccine announcements on November 9 from Pfizer/BioNTech, many markets, especially stocks related to technology and a certain car company, have all behaved as if they have been injected by steroids. Thereby creating market conditions which most of all resembles the weeks leading up to the bursting of the tech bubble two decades ago. With this in mind, we see an increased risk of the ‘party’ sooner or later being disrupted by a reality check.
Commodities, especially industrial metals, crude oil and fuel products, have responded strongly to the prospects that already strong demand from Asia, led by China, will increase further once Europe and the U.S. emerge from underneath the Covid-19 cloud. In doing so, some markets, especially the energy sector, have managed to shrug off a renewed slowdown in fuel demand as the coronavirus case count and number of deaths continue to rise.
Gold continued to consolidate with the current lack of momentum into the low liquidity time of year raising the risk of increased volatility. Especially after its return to relative safety above $1850/oz lasted less than a day. Silver, meanwhile, also turned lower after being forcefully rejected at $24.80/oz. As mentioned, we have entered the time of year where profits are being defended and where a lack of momentum can cause some major price swings. Markets that currently lacking momentum are precious metals and more recently platinum, while copper has yet to break levels that may cause a sweat among speculators holding elevated long positions.