Commodities and Cryptos: Oil slumps on cartel chaos, Gold shines, Visa Crypto demand impresses

Oil

Cartel chaos is finally sending oil prices lower.  The UAE has clearly shown their cards that they want to raise production and market share amid strong demand.  The UAE will likely find some middle ground with Saudi Arabia, the experiment that is OPEC+ could be ending later this year.  The energy market has a handful of strong years left as the world makes the shift to renewable energy, so most OPEC+ members feel the urgency to capitalize this moment of robust demand and high prices.

Gold

The bond market rally has been gold’s best friend.  Bullion buying has been steady as gold futures rally for a fifth consecutive day and form a golden cross.  Gold is holding onto the $1,800 level after the Fed’s minutes signaled there is no strong agreement over tapering amongst policymakers.  The Minutes were slightly dovish and that should support keeping Treasury yields heavy which could continue to drive gold higher.

Gold prices could continue to see steady flows now that the economy is beyond peak growth and as Wall Street continues to look beyond current pricing pressures and shrug off inevitable likelihood wage growth will pick up shortly.  If inflation continues to look like it will be transitory and wage growth does surge over the next couple of months, the Treasury curve will continue to flatten and that should be very bullish for gold.

Cryptocurrencies

It might not mean a lot for Visa, but news that the credit card giant saw over $1 billion worth of cryptocurrency spent by consumers in the first half of the year is tremendous news in making progress towards mainstream payment acceptance.  Financial institutions will continue to embrace cryptocurrencies and that should be great news for the long-term bets on Bitcoin and Ethereum.

Bitcoin remains trapped in the $30,000 to $40,000 trading range and that is fine for many long-term investors.  The current price action should be considered to be healthy for Bitcoin as ESG concerns are getting addressed and as miners exit China.   If the Bitcoin Mining Council is accurate that the miner energy consumption mix was 56% sustainable energy in the second quarter, we could see parts of Wall Street start to scale back into cryptos in expectation substantial progress will be made by year end.

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