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Commodities and Cryptos: Oil struggles over demand outlook and strong dollar, Gold hits a wall, Bitcoin coiling up

Oil

Delta variant cases continue to wreak havoc over the short-term crude demand outlook.  Oil prices have been in freefall as Wall Street turns cautious over delta variant jitters and as Fed taper expectations boost the dollar.  Now that crude prices have hit the lowest levels since May, OPEC+ is getting nervous over their strategy to ramp up output.  Oil producers want to boost supply but want to make sure they avoid taking this market away from its deficit. 

Crude prices will struggle to catch a bid as the peak of summer driving is behind us and now the return to the office might be in jeopardy for many companies.  OPEC+ was expecting to boost supply, but given some of the lingering risks for crude demand, they might want to hold off raising output at the September 1st meeting.  If the theme across Asia is for further restrictive measures, oil prices could remain heavy over the short-term. 

Despite the recent oil price weakness and near collapse to bear market territory, a strong reversal may not be too far away.  Crude fundamentals still support robust demand once most of the world is beyond this latest wave of the delta variant.  COVID cases could be peaking in the US and as vaccination efforts continue to improve globally, reopening momentum should resume after September. 

Gold

Gold volatility should remain elevated heading into the Jackson Hole symposium as many active traders grow cautious.  The Charles Schwab Active Trader Pulse Survey showed that active traders that have not changed strategies due to delta are leaning toward increasing their cash exposure and decreasing overall equities exposure. 

If Fed Chair Powell taps the brakes on the Fed’s plans over tapering, that could be the catalyst to take prices above the $1800 level.  Gold has been one of the best performing commodities despite a rising dollar, but if Wall Street sees a massive selloff, panic selling may strike bullion down.  

As long as Treasury yields remain grounded the gold trade should be alive and well. If gold is able to have a daily close above the $1800 level, bullish momentum could target the $1830 level.  If Powell signals he is ready to head for the exit and join the chorus of members calling for tapering, gold could slump back towards the $1700 region. 

Bitcoin

The global crypto market cap value is now back above $2 trillion as Bitcoin continues to see steady inflows.  Bitcoin dominance is waning however as much of the interest in cryptocurrencies is spreading to Ethereum, Cardano, XRP, and Dogecoin. 

Bitcoin is having another run at $48,000 at the end of the week. Given the overall risk-off tone on Wall Street, Bitcoin could still face resistance if the broader market is downbeat. 

The price of Bitcoin could break above the $50,000 level next week if Fed Chair Powell decides he wants to slow up the Fed’s plans on tapering.  The longer-term outlook for Bitcoin is looking perfectly healthy regardless of whether we see a breakout or a pullback here.

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 [4]

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