Commodities and Cryptos: Oil pares weekly gain, Gold’s bad week could have been worse, Tough week for cryptos

Oil

After a robust trading week, oil prices had a choppy Friday session after reports that Kazakhstan did not have to halt any oil and gas production and following the latest employment report that still paved the way for a March Fed rate hike.

While optimism is high that the omicron variant impact on the crude demand outlook will be short-lived, it is too early to be optimistic that the worst of this wave is over.  The US CDC Director noted that the US hasn’t seen the peak of this covid wave yet.  With the US still seeing parts of the country struggling with hospitalizations and Germany considering fresh curbs, and as China continues to resort to harsh lockdowns, the short-term demand outlook still has a handful of headwinds.

The oil market remains very tight and that should remain the case for the first half of the year as the growth outlook across the US and Europe remains very strong.

Gold

Gold is little changed after the latest jobs report paves the way for a Fed rate hike in March.  Wall Street is now struggling to find out what will end up being the neutral rate. A few rate hikes are already priced in for 2022, but the question everyone has is will some of the balance sheet runoff end up replacing some of the future rate hikes.  Gold had a bad week, but it could have been much worse when you consider the 10-year Treasury yield went from 1.53% to 1.75%. Gold is tentatively below both the $1800 level and the 50- and 200-day SMA, but a continued selloff seems less likely.  If bearishness resumes next week, buyers could emerge at the $1770 area.

Cryptos

This was a terrible start to the year for cryptocurrencies and that is largely in part to growing diversification into other products such as NFTs, it didn’t help that the mega-cap tech selloff triggered a de-risking event for cryptos, and as Fed rate hike and balance sheet reduction expectations grew dramatically.  Ethereum suffered a big blow after Vitalik Buterin noted Ethereum is not ready for mass adoption in its current form.

Bitcoin remains vulnerable to a breach of the $40,000 level and it could get ugly for Ether if it breaks the $3,000 level.  The long-term outlook is still bullish for both the top two cryptocurrencies, but the short-term is looking ugly.

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