Oil slides on demand fears, gold struggles, bitcoin tanks on potential double-spend story

Crude vulnerable to Chinese demand

Crude prices can’t shake off rising concerns that the demand outlook might get a big short-term hit if China experiences a debilitating wave of new coronavirus cases.  COVID vaccine distributions remain a scramble as states can’t wait for the federal government to get vaccine supplies in order.  Michigan and New York have reached out to Pfizer for additional doses and until vaccines are distributed smoothly the recent surge in oil prices should be capped.

Energy traders are also patiently waiting until tomorrow for the EIA crude oil inventory report.  Yesterday, the API data showed a surprise rise in stockpiles of 2.56 million barrels last week, which could signal the first build since early December if the EIA report confirms it.  Expectations are for EIA to show crude oil inventories fell 1.7 million barrels, a smaller than the 3.25 million draw seen last week.

WTI crude seems poised to hover slightly above the USD50 level unless we see more lockdowns emerge out of Asia.

Gold falls on strong US data

Gold appears to need deteriorating economic data to continue its climb higher.  Gold prices turned negative after impressive housing starts data, the Philly Fed outlook rose to its best level since the beginning of the pandemic, and as initial jobless claims remain elevated.  It seems gold traders focused on the Philly Fed business outlook, which had so much optimism that it dampened prospects that the Biden administration will not need to do more after lawmakers deliver the next round of stimulus.

Gold is also losing some momentum as some moderate Republicans throw some cold water on President Biden’s proposed USD1.9 trillion COVID stimulus plan.  A lengthy debate over what is an acceptable figure of stimulus will likely see some Republicans posturing for a much lower relief plan.  Stimulus will happen; the uncertainty of how much and when it will get wrapped up might disrupt bullish calls for gold in the short-term.

Gold still remains attractive but that could change if prices can’t rally as the dollar continues to weaken.  Gold should see strong support ahead of the USD1,950 level.

Bitcoin takes a dive

One of the big problems for bitcoin is that there is not a head of bitcoin that can address any structural issues with their technology, unless Satoshi Nakamoto, presumed creator of bitcoin, comes out in the open.  Bitcoin prices tumbled around 10% last night after BitMex Research reported a potential double-spend transaction valued at around USD21.  This is not the first double-transaction that has raised alarms for the crypto-space but serves as a reminder as transactions grow and systems are updated, vulnerabilities to double-spend will happen.

While today’s selloff is significant, it is not a crash, as one of the saving graces for the cryptoverse is that blockchain requires more than one confirmation, possibly six for a transaction being secured.  Some bitcoin-related services require three confirmations blocks to release funds, but what happened overnight seemed to be a one-block bug.  Confidence in cryptos will take a hit, but it seems an infiltration on the blockchain did not happen.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya