Outline of the week A jump for oil but a setback for gold Bitcoin above $ 40.000
Outline of the week A jump for oil but a setback for gold, Bitcoin above $ 40.000 for the first time
Outline of the week : Last week was an event week, some of which affected financial markets, while others were ignored.
Perhaps the most prominent event was the storming of Capitol by supporters of Trump,
after questioning the outcome of the last US presidential election that took place in November of last year.
Trump supporters gathered in a rally around the building where an extraordinary session of Senate
and representatives was being held in order to ratify election result by announcing Joe Biden’s winning.
The outgoing US President Donald Trump, called for these demonstrations which amounted to
violent acts that led to kill nearly 4 people and the injure of others.
Then, Trump asked his supporters to go back home, but at the same time some of his words
meant some incitement to violence, which made Twitter permanently ban his account,
while Facebook and Instagram suspended his account for two weeks.
Evest brings you the outline of markets this week.
A positive week for crude oil
The first full week of this year trading has ended. It was a very promising start for oil sector
which managed to make a major recovery and maintain the upward momentum.
Brent crude oil crossed $ 55 a barrel for the first time since February 2020 and the week was roughly closed at $ 56 a barrel.
US West Texas Intermediate crude futures also unexpectedly breached the $ 50 barrier for the first time
since early 2020 and closed the week at the rate of 52.24 a barrel.
This uptrend in market came amid prospects for greater financial stimulus in United States
in addition to optimism about vaccine and weakening of US dollar.
The significant decline in US oil inventories announced by US Energy Information Administration last week,
besides, the positive results from the first OPEC+ meeting in 2020, also contributed in supporting prices.
Traders ignored much of negative news during last week, as it appears that they have shifted their focus and sentiment only towards optimism.
They were not alarmed by Chaos that occurred in Capitol building when Trump supporters stormed the building of Senate,
rioted and sabotaged it.
This led to the postponement of the confirmation hearing on Joe Biden winning Presidency for a few hours.
Oil prices also rose despite new closures in Europe that delayed expectations of a recovery in demand.
Forecast for cooler-than- normal weather in Europe and Northern Hemisphere should support rising demand for heating oil
as everyone tries to warm their houses during lockdown. However, this factor has not been realized yet.
Although 2021 has begun and everyone expects the price of oil to decline but these expectations have now faded,
as prices unexpectedly began to rise.
Most optimism forecast for oil prices were that price of a barrel of Brent crude would reach $ 60 in the second quarter of 2021.
Energy Information Agency has forecast that Brent and West Texas crude oil will be respectively at $ 48.53 and $ 45.78 in 2021.
A sharp drop of gold
Gold prices have witnessed a decline since the start of this year.
The yellow metal has lost much of its value and returned to levels below $1850 an ounce.
Both US Treasury yields and increasing expectations regarding the approval of a major economic relief package
that will be approved soon because of Democrats winning everything in United States of America, have affected fluctuations of precious metal.
Joe Biden won President’ seat. The last run-off in Senate in Georgia was able to complete Democratic Party’s
control on Senate and also to become his legislative arm in USA.
Ten-year yield on US Treasuries rose above 1%, which pushed bullions to be back down.
Market participants are now awaiting the nonfarm payrolls report which will affect monetary policy outlook
as US economy unexpectedly sheds 140.000 of jobs in December.
Next week, precious metal may get a boost from US Consumer Price Index update as inflation reading is expected to rise from 1.2% in November
to reach 1.3% in December on an annual basis, while expectations indicate that the core consumer price index has stabilized for the third month in a row at 1.6%.
On the other hand, expectations indicate a 0.2% decline in retail sales in December,
while US consumer confidence survey may record a reading of 79.2 in January compared to 80.7 in December 2020.
Drop in household spending in addition to signs of diminishing consumer confidence may undermine the recent rise in US Treasury yields,
which support gold this week.
Gold needs to stabilize at least till January 27th, when new interest rate decision will be issued by
Federal Open Market Committee.
During last week, the yellow metal has weakened its performance to decline at a rate of 4.5% on Friday.
This is the biggest drop since November 2020, as prices settled below $ 1.859 an ounce.
Nikkei is at its best during 30 years
As the safe haven of investments fell, world stocks were flying higher with Japanese Nikkei index soaring for more than 3 decades on Friday,
despite political turmoil in US after Trump supporters stormed Capitol.
Bitcoin surpasses $ 40.000 for the first time
Cryptocurrency Bitcoin is back into controversy again as it rose significantly,
to record more than $ 40.000 for the first time in its history, after doubling its value in less than a month.
Bitcoin has jumped by more tha700% since spread of Corona Covid-19 virus was announced in March 2020, when it was trading at only $ 500.