Commodities and Cryptos: Oil rebounds, Gold slides, Bitcoin sinks

Oil

Crude prices are rising on optimism Chinese demand is improving and that sweeping legislation could keep the oil market tight.  The energy market is still digesting the Chinese crude intervention news and trying to figure out if the Biden/Xi call will lead to a more positive environment for risk appetite. 

The crude supply outlook might keep the oil market tight as the House tries to deliver sweeping legislation that could cripple offshore drilling.  While the House might support the legislation to address climate change, the Senate’s conservative democrats might balk at the bill.

Reports that OPEC will revise lower its 2022 oil demand growth forecast next Monday is why today’s rally ran out of steam. 

WTI crude continues to respect the $70 level, but bullish momentum might not be too far away given the improving fundamental drivers. 

Gold

Gold prices declined after US producer prices accelerated in August, sending Treasury yields sharply higher.  Gold isn’t acting like an inflation hedge at the moment and will struggle to get its groove back until pricing pressures trigger risk aversion and boost demand for safe-havens.  Gold needs to see strong demand for Treasuries send yields back down before investors get behind bullion again. 

Gold’s struggles could extend into next week if the yield curve continues to steepen.  Initial support remains the $1750 level, with $1700 likely being a level that would attract many long-term bets. 

Bitcoin 

Bitcoin volatility will likely remain elevated as further regulatory oversight appears to be just around the corner.  The Fed is expected to unveil a research paper this summer that explores a move to a central bank digital currency.  The heavily anticipated Fed research paper could show how the Fed anticipates regulation to deliver a safer environment for the public in using cryptos and how to make payment systems more efficient.  The SEC might also deliver new guidelines that could disrupt how crypto lenders behave and which products they can offer. Bitcoin prices are attempting to form a base after a crash was triggered on the first day El Salvador made it legal tender.  If the floor gives, panic selling could lead to another massive drop.

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