OIL-The collapse of the oil price is not yet over

The collapse of the oil price is not yet over. As mentioned in previous comments, the new agreement seems to be massive but in reality it is simply not enough in the face of the collapse in oil demand, leaving producers in serious crisis. In just a few days we have seen the price slow down to test the support zone at $19.50. A clear break down of these levels could open space for a new low with the bearish sentiment far from finished.

GOLD is back in green

Gold is back in green today to continue its unusual direct correlation with stocks, which are also gaining amid a positive environment for shares. This follows both asset classes, which typically are inversely correlated, falling yesterday. Technically we are still in a bullish scenario, with the gold price not being boosted by the risk scenario but from the awareness that central banks are going to be forced to print a huge quantity of liquidity in the next months, and probably years too.

For the spot price, the zone $1,700-$1,710 has now become a first support area, while a climb above $1,730 could open space for further rallies and new records.

FOREX-US dollar continues to strengthen

The US dollar continues to strengthen during the morning trading session in Europe, as the flight to safety intensifies with a cascade of sobering numbers from around the globe illustrating the scale of the economic recession triggered by the coronavirus crisis. The greenback is gaining ground against all other major currencies pushing the Dollar Index to the vicinity of 100. Interestingly, the dollar is recording gains against both the Japanese yen and the Swiss franc, outperforming the two refuge currencies par excellence in terms of safe-haven appeal.

OIL-Cut of 9.7 million barrels per day

Despite the world’s oil producers agreeing to a massive cut of 9.7 million barrels per day, the oil price was unable to hold onto its initial gains as investors are still expecting there to be a global oversupply for the next few months. After a positive gap when markets opened, WTI has fallen again below $23, confirming the bearish trend seen in the first few months of 2020. Almost 70% of the recovery seen after Donald Trump’s tweet about the possibility of an agreement has been lost, confirming the maxim of “buy the rumour, sell the fact”. On a separate note, it is worth noting that Brent is once again performing better than WTI, with a growing spread between the two benchmarks.

FOREX-Investors aren’t entirely satisfied

On a Monday marked by lower than usual trading activity, due to the holiday in Britain, Hong Kong and Australia, the focus so far has been on the performance of currencies of oil exporting countries, such as Canada, Mexico and Norway, all of which are recording losses against the US dollar. It appears that investors aren’t entirely satisfied by the compromise reached between OPEC and other major oil producers on Sunday. The agreement to a record cut in oil output failed to reassure the markets, with the prevailing sentiment being one of aversion to risk due to fears that the newly reduced production quotas will fail to offset the damage inflicted by the drop in demand caused by the coronavirus crisis. This scenario is punishing not only to the oil price but also to the value of oil producing countries’ currencies versus the dollar.

Gold is shining with the spot price closing in on its 7-year-high at $1,700

Gold is shining with the spot price closing in on its 7-year-high at $1,700. Bullion rallied after the announcement of the Federal Reserve’s new coronavirus stimulus. Another $2.3 trillion of lending will be in the system to soften the impact of the pandemic emergency. As mentioned in previous comments, markets are understanding and pricing in every day that central banks will be forced to create a huge amount of new liquidity. The amount of cash in circulation is growing much quicker than the gold, which of course cannot be printed. Gold production is increasing the amount of gold in circulation by less than 2% per year, while the monetary mass is dramatically increasing week by week to mitigate against the impact of the virus.