Commodities Daily - November 24, 2020

> Oil rises again on more vaccine progress and start of US presidential transition process. Today, the market will be tracking German 3Q20 GDP and November US consumer confidence data. The latter is likely to have been pressured by Covid-related restrictions and reduced fiscal aid. This morning, Brent broke above $46.4/bbl resistance after news that US President-elect Joe Biden has been given the go-ahead to begin his White House transition and progress made by Astra Zeneca's vaccine. We expect Brent to climb to $46.7/bbl, with further upside likely to be capped at the $47.4/bbl mark amid expectations of downbeat November US consumer confidence data. The nearest support is at $45.6/bbl. A break below that would pave the way to $44.8-45.3/bbl.> Gold prices plummet as upbeat US PMIs seen as dampening need for more stimulus. This morning, investors are digesting news that US President-elect Joe Biden will nominate former Fed Chair Janet Yellen to be Treasury secretary. She has been a loud, clear voice supporting calls for more fiscal stimulus, making the nomination clearly short-term bullish for markets. Yesterday's gold price correction has now opened a path toward the $1,811/oz support level, and we see appreciable risks of a break below this level today and then a fall toward $1,783/oz. In our view, however, this is the less likely scenario. Rather, we think that gold, having battled with the $1,827/oz resistance level, will push toward $1,841/oz today.OIL RISES AGAIN ON MORE VACCINE PROGRESS AND START OF US PRESIDENTIAL TRANSITION PROCESSBrent opened near $45/bbl yesterday and then climbed to $46/bbl in early European trading. It traded sideways within a $45.4-46.1/bbl range for the rest of the day but struggled to consolidate above $46/bbl, something it failed to do on numerous occasions back in August, when oil prices were at a post-pandemic peak. It eventually settled at $46.06/bbl, up $1.1/bbl on the day. UK drugmaker AstraZeneca yesterday reported that its vaccine, developed along with the University of Oxford, could be up to 90% effective and that it will have as many as 200 mln doses by the end of 2020, around four times as many as US competitor Pfizer. Furthermore, it can be transported and stored at normal fridge temperatures, which would make it easier to distribute than Pfizer's, which needs to be shipped and stored at -70C. The numerous upbeat vaccine developments continue to drive the Brent futures curve from contango toward backwardation, with the front-month contango vanishing late yesterday. The spread between the two contracts was as wide as $0.5/bbl in early November. We think the only development that could derail this transformation would be a decision by OPEC+ to go along with its initial plans to boost production by 2 mln bpd in January, which we regard as very unlikely. Upbeat preliminary US November PMIs yesterday provided further upbeat sentiment following a disappointing eurozone services PMI reading, which came in slightly worse than expected, while the manufacturing figure beat expectations. This indicates that the US economy continues to perform well despite the lack of further fiscal stimulus and further coronavirus restrictions in November. However, the dollar gained significant strength following the release, which provided some headwinds. Today, the market will be tracking German 3Q20 GDP and November US consumer confidence data. The latter is likely to have been pressured by Covid-related restrictions and reduced fiscal aid. This morning, Brent broke above $46.4/bbl resistance after news that US President-elect Joe Biden has been given the go-ahead to begin his White House transition and progress made by Astra Zeneca's vaccine. Biden will nominate former Fed Chair Janet Yellen to be Treasury secretary. She has already been a loud, clear voice supporting calls for more fiscal stimulus from the US Congress, making the nomination clearly short-term bullish. We expect Brent to climb to $46.7/bbl, with further upside likely to be capped at the $47.4/bbl mark amid expectations of downbeat November US consumer confidence data. The nearest support is at $45.6/bbl. A break below that would pave the way to $44.8-45.3/bbl.GOLD PRICES PLUMMET AS UPBEAT US PMIS SEEN AS DAMPENING NEED FOR MORE STIMULUSHaving traded around $1,875/oz at the start of the day yesterday, gold prices first began to slide toward the $1,865/oz mark as the US 10y yield rose on more upbeat vaccine news, with several countries announcing plans to kick-start vaccination programs. The US has indicated mid-December and some European countries December-January as time frames for them to start. Yesterday saw the announcement that a vaccine co-developed by Oxford University and AstraZeneca is 70% effective in preliminary trial results. Although the first data are not as positive as the 90% results from the Pfizer and Moderna vaccines, the Oxford/AstraZeneca product has far less stringent storage and logistical requirements.Investors were also focused on IHS Markit preliminary November PMIs for the eurozone, with the services reading coming in slightly worse than expected, while the manufacturing figure beat expectations, which supported EUR/USD briefly to above 1.19, which was a slight tailwind for gold. However, at 17:45 Moscow time, the US preliminary PMIs came out - despite the Covid-19 situation, they turned out very strong. The composite index rose to 57.9, the highest in four years, which suggests that the US economy is recovering rapidly even without another round of fiscal stimulus having been passed. The data seems to have led to a serious repositioning in markets: EUR/USD began to freefall toward 1.18, while gold plummeted to $1,830/oz, as the data were taken as dampening the chances of major US fiscal measures in the future.We think that if the US economy remains robust in December, no more than $500 bln of fiscal stimulus would be on the table, compared with $1.6-2.0 trln discussed before the US election. However, if the $400 bln from unused funds under Fed relief programs (they had initially been earmarked to cover any losses sustained under the Fed's refinancing programs, which saw very little demand) are returned to the Treasury to be deployed as stimulus, then this, taken together with a $500 bln stimulus bill, would still mean almost $1 trln early next year, which in our view would be sufficient to boost inflation expectations and in turn gold prices. This morning, investors are digesting news that US President-elect Joe Biden will nominate former Fed Chair Janet Yellen to be Treasury secretary. She has been a loud, clear voice supporting calls for more fiscal stimulus, making the nomination clearly short-term bullish for markets. Yesterday's gold price correction has now opened a path toward the $1,811/oz support level, and we see appreciable risks of a break below this level today and then a fall toward $1,783/oz. In our view, however, this is the less likely scenario. Rather, we think that gold, having battled with the $1,827/oz resistance level, will push toward $1,841/oz today.