Commodities: Oil rally pauses, Gold lower, Bitcoin breaks $40k

Oil

Energy traders were not surprised to see the oil price rally slow down.  WTI crude fell after a surprise build with US stockpiles and following a bloodbath on Wall Street that sent risky assets into freefall. Crude prices may not have a one-way ticket to $100 oil, but the supply-side fundamentals certainly support that could happen by the summer.  The next few trading sessions could be difficult for energy traders as oil prices may move more so on investor positioning ahead of Wednesday’s FOMC policy decision and over a handful of brewing geopolitical risks, that include Russia-Ukraine tensions, Iran nuclear talks, and developments with global handling over North Korea. 

The crude demand outlook is also providing steadily positive support for oil prices throughout the rest of the year.  Schlumberger CEO Olivier Le Peuch, noted, “Absent any further COVID-related disruption, oil demand is expected to exceed pre-pandemic levels before the end of the year and to further strengthen in 2023.” The oil market should remain very tight and if we have any disruptions to productions, that should easily send prices much higher. 

Gold

Gold prices edged lower as commodities got punished after Wall Street entered into a major de-risking mode.  Normally gold performs well when Treasury yields drop, but today was all about going back to cash. Earnings have underwhelmed and fears of how the economy will handle higher interest rates has many investors concerned that risky assets could continue to slide further next week. 

Given that large parts of the economy will still perform well this year despite higher borrowing costs, gold will eventually find the right balance of becoming both a safe-haven and inflation hedge.  Gold most likely won’t be vulnerable to an excessive panic-selling market selloff given how strong the economy is positioned, so if prices can break past the $1850 barrier post-Fed, the path to $1900 should be there. 

Bitcoin

Bitcoin has quickly gone from a consolidation pattern to the house of pain.  The world’s largest crypto plunged as crypto traders de-risk portfolios following the bloodbath in stocks and in advance of next week’s FOMC policy meeting. Risky assets did not stand a chance today and momentum selling accelerated after Bitcoin broke below $40,000 level. Bitcoin remains in the danger zone and if $37,000 breaks, there is not much support until the $30,000 level.   

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