Oil pares losses on EIA report, gold steadies, bitcoin softens

Oil rises on EIA inventory decline

Crude prices turned positive after a very bullish EIA crude oil inventory report that sent stockpiles to the lowest level in a year and the largest increase in exports since 1993.  The weekly crude oil inventory report posted a 7.25-million-barrel draw, a bigger drop than the eyed 2.4 million estimate, and the prior 6.65-million decline in stockpiles.  This week’s EIA data does not include any impact from the Great Freeze but suggests we should expect inventories to continue to decline over the coming weeks.  The havoc over the next couple of readings will see massive disruptions of almost 40% of US output.  The short-term hits to both crude consumption and US production do not really derail the supercycle oil trade.  The extreme weather is not behind us as Cameron LNG in Louisiana had to declare a force majeure on cargo loadings.  Another ice storm could occur tonight and that could keep the pressure on the Texas grid for a few more days.

WTI crude remains heavy and is quickly giving back the rebound post-EIA crude oil inventory report.  Today’s risk-off session continues to weigh on oil prices but short-term production drivers should keep the losses limited.

Gold

While bitcoin enjoys the limelight, the short-term pain for gold continues as investors continue to pass on it as if it were a messy hors d’oeuvres.  The past couple of weeks have seen fundamental arguments made for choosing silver, bitcoin, and Treasuries over gold.  Silver was expected to outperform as industrial demand will lead it to become the more attractive precious metal.  Bitcoin has benefited from relentless retail demand and on expectations that institutional interest is still growing.  Now that global bond yields are rising, some investors are preferring interest-bearing Treasuries over gold.

Gold’s best friend, however, remains the Fed and they will eventually save the day.  The Fed wants a steeper yield curve but not in such a dramatic way.  Once the Treasury yield trajectory is reigned in, gold should start to stabilize and eventually resume its role as a safe-haven and inflation hedge.  Gold will still battle from competition from silver and bitcoin, but ultimately should still see significant demand.

Despite a brutal trading week, gold is tentatively holding onto the USD1765 level.  If bearish momentum continues, tentative support will come from the USD1,750 level, but after that it could get ugly fast.

Bitcoin

Positive bitcoin news can’t shake off today’s overall risk-off trading day.  Bitcoin saw a successful launch with the Purpose Bitcoin ETF, the first Bitcoin ETF in North America.  This marks a special day for bitcoin as the passing of an ETF proved difficult over the past couple of years.  This Bitcoin ETF launched in Toronto and raises expectations that we will get one soon in the US.

Bitcoin also got another key endorsement from Bond King Jeffrey Gundlach.  Gundlach, who was bullish on gold in 2020, turned neutral on gold last month and now sees Bitcoin as potentially “The Stimulus Asset”.

Bitcoin mania is taking a break today, but still looks technically very bullish.

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