Oil pares gains, gold’s pain, bitcoin surges again

Oil

Energy markets are focusing more on the deep freeze that is curtailing US production by a third and less on Saudi Arabia’s plan to ramp up production in the coming months.  Despite a strong dollar and expectations the Saudis will quickly take back their surprise 1 million barrel a day production cut, oil prices continue to creep higher.

The Saudi plan to increase production, however, is being spun as a sign that there is a lot of optimism for the global economic recovery.  The crude demand outlook should warrant the Saudi increase in output since Asia is winning the war on COVID, the US is headed in the right direction and Europe is slowly getting everything in order.

The debate on whether this is the beginning of a commodity supercycle is growing and that could support another 10% higher for crude prices.

Gold

Gold appears to be in freefall as the dollar rallies, Bitcoin hits fresh records, and Treasury yields pulled back from one-year highs.  The global economic outlook got a boost after European Commission secured hundreds of millions of COVID vaccine doses.  Virus mutations remain a risk to the outlook and could derail the reopening of the global economy, but for now that risk appears to be low.

If the brunt of the surge in Treasury yields is over, gold prices could start to show some signs of stabilizing, but right now technical selling remains strong.  If the USD1750 level does not provide an ounce of support, selling pressure could get ugly for gold.

Will Bitcoin keep moving higher?

Bitcoin is rallying after MicroStrategy had robust demand for their bond offering which will buy more bitcoin and after Gartner reported 5% of finance executives they polled are willing to invest in cryptocurrencies.  MicroStrategy priced USD900 million in its convertible debt sale, much higher than the planned USD600 offering.  Demand is strong for cryptos and MicroStrategy is completely taking advantage of this rally.

Gartner, a leading research and advisory company, reported that just 5% of finance executives polled in February 2021 said they planned to hold Bitcoin as a corporate asset in 2021.  The poll showed “77 finance executives (including 50 CFOs) this month showed that 84% of respondents said they did not plan to ever hold bitcoin as a corporate asset.”  The biggest risk for the executives was that Bitcoin’s volatility posed a financial risk.

If you are a bitcoin bear, this confirms the laundry list of reasons that this speculative mania will end abruptly.  The top concerns from the Gartner poll were: financial risk due to volatility, board risk aversion, slow adoption as an accepted form of payment, and regulatory concerns.  However, if a low percentage of companies are willing to bet on bitcoin or become crypto-friendly that could suggest prices could still run much higher.

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