Oil and gold rally, bitcoin sinks

Oil prices rise together with equities

Crude prices rallied alongside the record run with US equities and as key oil spreads start to improve (pricing in the Saudi surprise voluntary 1 million bpd production cut announced earlier in the month).  The oil market seems unfazed with all the new virus variants and lockdown headlines and is focusing on President Biden’s agenda that should help defeat COVID a lot sooner and support large parts of the economy until crude demand recovers.  Oil’s fundamentals are improving but right now it is all about stimulus expectations that are driving prices higher.

WTI crude is facing massive resistance from the USD54 level since short-term risks remain elevated for the demand side as China resumes some lockdowns.  If cases in the US continue to fall fast, that should offset any rise we see in Europe.

Gold prices head higher

Gold is rising higher as President Biden’s first 100 days point to lots more stimulus, inflationary pressures, and a focus on jobs.  The dollar does not stand a chance if Biden delivers on his agenda and that should provide a strong backdrop of support for all commodities.

Lost in today’s news for gold is the recent weakness in bitcoin.  Over the past two months, Bitcoin would easily outperform gold on a day like today that is seeing a mostly weaker dollar and risk-on mood for stocks.  Bitcoin’s bubble is not bursting but some investors are waiting for greater clarity on regulation and that should help bring back some of that institutional flow back into gold.

Gold will struggle to break above the USD1,900 level unless Biden’s stimulus plan gets a fairly quick greenlight.

Bitcoin just entered the danger zone.  A weaker dollar and with much of Wall Street on risk-on mode, bitcoin is down around 5%.  Demand for cryptocurrencies is plummeting as the global crypto market cap drops below the USD 1 trillion level.  This doesn’t seem like the end for the crypto bubble, but you just might need to see Bitcoin drop to USD30,000 level before that institutional money sees value in it.  Bitcoin volatility is not going away anytime soon, but right now it seems the cryptoverse is in for a lot more pain in the short-term.

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