Commodities and Cryptos: Oil turns positive, Gold pares losses, Bitcoin rallies

Oil

Crude prices declined after initial lab results showed that two doses of the Sinovac COVID vaccine was ineffective in neutralizing the omicron variant. With much of the emerging world dependant on the protection the Chinese vaccines offer, the short-term crude demand outlook could take a massive hit if the spread worsens across China and the emerging world.

WTI crude pared earlier losses after the EIA crude oil inventory posted a larger-than-expected draw of 4.58 million barrels last week. Demand is not looking too bad as petroleum product demand rose to a record high, gasoline and distillates inventories delivered surprise draws, and as US exports jumped back above the 3 million bpd.

Omicron worries will keep oil prices heavy as even the virus continues to spread quickly across heavily vaccinated countries. The UK reported 78,610 more COVID cases, the most since the pandemic began.

Crude prices turned positive after the Fed confirmed their hawkish turn and signaled they are positioning themselves to tackle inflation in the second quarter. The Fed is hoping to only deliver a few rate hikes next year and that should still allow the economy to grow by 4% next year.

Gold

Gold prices got knocked down after the Fed signaled inflationary pressures will force them to finish tapering by mid-March and that next year they could deliver three rate hikes, with an additional three in 2023. The risk that the economy could fall into recession in 2023 does not seem so unreasonable.

Gold’s weakness could be near its end as the Fed will be on autopilot until the March policy meeting.

Cryptos

Bitcoin and Ethereum rallied after the Fed showed they are turning more aggressive with rate hikes and significantly increased their inflation forecasts. The playbook for the next several months is that risk appetite could remain in place if the Fed only has to deliver only a few rate hikes next year, which would be great news for cryptos.

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

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