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Those looking at oil and gold returns for 2020 might have blinked, had they  seen the numbers back-to-back.  To be sure, both had the same percentage on print — only that one was in the positive and the other in the negative.

Gold prices rose 21%, shooting to record highs above $2,000 an ounce before turning volatile.

A hedge against inflation, the yellow metal benefited from one of the worst years for the dollar as the U.S. Federal Reserve held interest rates near zero, while Congress issued two Covid-19 relief packages totaling about $4 trillion. More than gold, silver had an epic year, gaining more than 40% as its industrial applications came into play as well.

Oil prices fell 21% as air travel and all mobility requiring fuels came to a halt in the early stages of the pandemic, forcing crude producers to drastically cut output. Vaccine breakthroughs did spur a market comeback. But the recovery fell short of making up the demand originally destroyed by the pandemic.

For 2021, the outcome for the two asset classes could also be a tale of two scenarios.

As markets begin trading for the year, one of the biggest events in U.S. politics – control of the Senate – looms, thrusting precious metals right into it.

An outright Democrat victory in Tuesday’s run-off elections in Georgia’s two Senate seats will give the Biden administration effective control of both chambers of Congress and the ability to pass just about any stimulus in the continued battle for U.S. economic recovery.

The president-elect, whose term begins Jan. 20, has hinted that he wants at least two Covid relief packages in 2021. Some are still peddling the theory that he will also raise corporate taxes in the year, as improbable as that seems. If that happens, it could be another factor to weaken the dollar. In such an environment, gold could easily hit new highs above $2,000.

Yet, all this will only happen if the Democrats get both Georgia seats in the Jan. 5 run-off elections – a situation that would draw them level with the Republicans in Senate representation, allowing Vice-President Elect Kamala Harris to break the tie with her vote. Otherwise, the Senate’s status quo under Republican Majority Leader Mitch McConnell stays.

What that means is little stimulus in the foreseeable future to help precious metals along.

“Markets have been pricing in the second scenario as an absolute certainty, with another two years at least of Mitch McConnell tempering the perceived fiscal largesse of a Biden presidency,” Jeffrey Halley, analyst at OANDA, said in his final note for 2020.

As for oil, vaccine deliveries hold the key.

One development that needs to be watched is the U.K. approval of Astra Zeneca’s Covid-19 vaccine that came just before the year ended. Rapidly producible in massive amounts, and storable at room temperatures, instead of the deep freeze required of the Pfizer (NYSE:PFE) vaccine, the Astra-Zeneca vaccine could be a potential game-changing accelerator in the Covid-19 battle.

But again deliveries are all important in the vaccine race – in this case, into the arms of Americans.

To this end, Biden bemoaned the snail’s progress at which Covid-19 vaccinations had been going on, with only about two million people immunized versus the target of 20 million.

“The pace the vaccination program is moving, if it continues to move as it is now, it’s going to take years, not months, to vaccinate the American people,” Biden said last week.

The president-elect vowed to “spare no effort” to get 100 million shots administered within his first 100 days in office.

Oil markets could be hooked on that promise.

Another concern for oil investors will be creeping production.

Come Monday, the Organization of the Petroleum Exporting Countries and its allies will meet to consider raising global production of crude by half a million per day for the second time in a month.

When the 13-member Saudi-led OPEC and its 10 allies led by Russia agreed to hike output by 500,000 barrels per day the first time in December, the market actually lauded the group’s discipline for adding less than the 1.0-2.0 million bpd forecast. Crude prices actually rose after the OPEC maneuver.

This time around, the market might not be as kind.

To add to the consternation of traders: The request is coming from Russia, which was responsible for escalating the price crash in April by insisting on raising production just as Covid-19 lockdowns were gathering pace across the world.

OPEC shenanigans aside, the other thing in oil that requires watching is U.S. oil rigs.  This gauge for determining forthcoming oil production — has risen 12 weeks out of the last 13, reaching 267 from last previous week’s count of 264.

Energy Review

New York-traded West Texas Intermediate, the key indicator for U.S. crude, did a final trade of $48.44 per barrel for 2020. It officially settled  the session at $48.52. For the last trading day of the year, it was down 12 cents, or 0.2%. For the year itself, it was off $12.54, or 21%.

WTI opened 2020 at $61.06 and reached $65.65 by the first week of January. Then came the epic crash that sent U.S. crude prices to minus $40 a barrel — the first ever negative pricing in oil’s history that forced those who owned crude to pay people to get the barrels off their hands.

London-traded Brent, the global benchmark for crude, did a last trade of $51.72 for 2020. It officially finished the year at $51.80. That gave it a gain of 46 cents, or 0.9% on the final trading day of the year. For the year though, Brent lost $14.20, or 22%.

Brent opened the year at $66 and hit a 2020 high of $71.75 by January, before plummeting to $15.98 in April.

After months of being stuck at the mid $30-40 levels, oil prices broke out from early November, rallying for seven straight weeks on optimism over Covid-19 vaccine breakthroughs and roll-out.

In the last two weeks of the year though, oil prices were back in a trading range, with WTI capped at $48 and Brent at $52, on concerns that immunizing the American people from the virus might now take longer than thought.

Precious Metals Review

Gold for February delivery on New York’s Comex did a final trade of $1,901.60 an ounce for 2020. The benchmark U.S. gold futures contract officially settled the last trading session at $1,895.10, up $1.70, or 0.1%, on the day. For the year, the contract rose 21%. Gold hit record highs of $2,089 in August.

Silver futures did a final trade of $26.525 an ounce for 2020. The benchmark U.S. silver futures contract officially settled the year at $26.412. It dropped 16.1 cents, or 0.6%, in final trading. For the year, it rose 44%. Silver hit record highs of $30.365 in August.

It was also a banner year for the six Platinum Group Metals, or PGMs, made up chiefly of platinum and palladium.

Analysts retained a favorable outlook for silver, gold and most precious metals in 2021, though that could come with some market correction, they said.

“A resumption of the broader December trend higher may likely continue in 2021,” Thomas Westwater, a technical analyst on gold, said in a blog on the Daily FX portal published two days before the new year.

“Covid-19 remains a lingering question mark for traders,” Westwater said, adding that while price consolidation was highly likely in the short-term, “higher ground appears to be favored in the technical outlook”.

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