Commodities and Cryptos: Oil weaker, Gold rout over, Bitcoin climbs

Oil

Crude prices were ripe for a pullback but both the medium- and long-term fundamentals remain very bullish.  COVID vaccine success is solely responsible for the consistent upgrades to the US economic outlook that will lead robust demand for crude.  The crude demand recovery in the US will be a lot faster than anyone is anticipating and that will likely lead to a moment in the summer when supply can’t keep up with demand. 

 It has been a while since crude prices slumped alongside a weaker dollar, so today’s choppy trade could reflect hesitancy to have a big position before the EIA weekly crude oil inventory report.   The US production outlook will start to normalize now that refineries had another week to get utilization rates up.  Energy traders will want to closely watch how strong US production can bounce back and if that poses a risk for OPEC+’s  hesitancy to raise output. 

The bullish rally with WTI crude appears to be running out of gas, but it seems unlikely a major pullback will occur unless a major disruption to the US reopening of the economy occurs.   

Gold

Just like that gold prices have rebounded over $40, back above the $1700 level.  The global bond market rally has the dollar in freefall and that is providing a major boost for gold prices.  Gold’s reversal occurred a couple dollars before it officially fell into bear market territory.  The line in the sand was $1,650 for gold, so this emphatic rebound looks like it could hold. 

Right now, Wall Street looks like it is a one-way trade following Treasuries, but that could be good enough to form a key bottom for gold prices.  By no means, is today’s bond market rally the end of higher Treasury yields, but it could be big enough to attract many big institutional bets back into gold.

Bitcoin

Panic selling from the bond market has eased and that was just what Bitcoin needed to get its groove back.  The news on the crypto front was somewhat limited today, but did provide some further education on NFTs from Glenn Hutchin’s CNBC interview. 

The best thing for Bitcoin right now is for a healthy consolidation around the $50,000 level.  Investors need to start to see more stability from the cryptocurrency market in order to attract steady demand.  Right now, a lot of the active institutional money is on the sidelines waiting for the next 20% drop before buying back in.  Bitcoin could be poised to make another run at $60,000 level, if we continue to see risk appetite emerge from the global bond market rally.  

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