Commodities and Cryptos: Oil pares losses, Gold bullied by Treasuries, Bitcoin lower on Binance probe

Oil

Crude prices initially slumped after a strong dollar returned and after India’s oil demand plummeted to the lowest levels since August.  The decline in oil prices is somewhat limited as expectations grow for Americans to deliver a much better-than-expected demand for crude this summer.  Biden’s goal of July 4^th to get America “closer to normal” is a gamechanger for fuel demand forecasts.  Car bookings and plane tickets are indicating Americans are going to travel big this summer and that should help bring back fuel demand.

Brent crude will remain stuck around the $70 level until the oil demand outlook improves in Europe, which will only happen when they stop struggling with COVID variants.  The US is still not in the clear over virus variant risks, but it seems that any setback would only be temporary now that much of the country is close to getting vaccinated.  Rising rig counts could provide some profit-taking in crude, but the outlook still remains very bullish over the medium-and long-term.

Brent pared losses after reports an Iranian container ship was hit by explosives in the Mediterranean.  The wildcard for oil prices over the summer will remain geopolitical risks in the Middle East that deliver any disruption with the transportation or output in crude.

Gold

Gold was supposed to have a nice first weekly gain but a risk-off session in Asia triggered a bond market selloff that sent both Treasury yields and the dollar higher.  Right now, gold is getting bullied by rising Treasury yields.  After surviving three key Treasury auctions (3s, 10s and 30s) with decent demand, gold thought it was going to have an easy Friday, but the bond market had another idea.

It looks like the bond market wants to make this an interesting FOMC event with much higher Treasury yields.  Gold’s key bottom of $1,673 should hold before Wednesday’s Fed policy decision, but if the 10-year Treasury yield skyrockets beyond 1.70%, that would trigger a panic selling move in gold.

Bitcoin

Bitcoin took a tumble after reports the CFTC is investigating Binance Holdings Ltd., the world’s largest cryptocurrency exchange.  The investigation focuses on whether Binance, an unregistered CFTC member allowed Americans to buy cryptocurrencies.

If we didn’t have cryptocurrency ETFs and futures trading, this probe news would have dragged Bitcoin sharply lower.  This investigation will undoubtedly be a headwind as many Americans see probes spreading across all the major platforms.

Bitcoin’s easy path toward $60,000 just got derailed, but massive selling pressure still seems unlikely because these probes will likely mean only more restrictive measures to curtail money laundering and sanctions violations.  The crypto world is fully expecting some regulatory changes, so this should not change the fundamental case for a much higher Bitcoin in the long-term.

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