Commodities and Cryptos: Oil rebounds, Gold stumbles, Bitcoin turns positive

Oil

WTI crude is rallying as risk appetite runs wild on Wall Street and after trade data showed US crude exports improved in June.  India posted twice as strong demand for US crude, implying once a country gets beyond the delta variant, crude demand will surge quickly. 

Today’s oil price gain however is still modest given that the crude demand outlook is taking a hit as the delta variant spreads across 15 provinces in China.   The Chinese vaccines are less effective than the mRNA vaccines and this could mean a slower reopening. 

WTI crude will likely consolidate between the $67 -$71 trading range until tomorrow’s employment report which could determine the next major move for the dollar. 

Gold

Gold prices tumbled towards the $1800 level after Treasuries extended declines as stocks eyed record high territory.  The gold market seems to be bracing for a rather impressive nonfarm payroll report.  Today’s unemployment insurance weekly claims report shows that over the past month, more than one million people are no longer claiming some kind of unemployment benefit.  Fed’s Waller added to the optimism of a strong reading after he said he expects the July employment report will show very high jobs.  Gold is looking vulnerable as the yield curve steepens and some investors are penciling in a taper announcement at Jackson Hole. 

Gold will likely hover around the $1800 level until tomorrow’s nonfarm payroll report. 

Bitcoin

Bitcoin pared losses after the Fed’s Waller showed his skepticism over the Fed creating a digital currency.  Waller was very downbeat on stablecoins and outlined the argument for the Fed to pass on digital currencies.  He added that a Fed central bank digital currency (CBDC) could disintermediate commercial banks and threaten a division of labor in the financial system that works well.

The cryptocurrency world still thinks the Fed will create a digital currency, but any hesitancy or resistance could support the case for continued Bitcoin/Ethereum dominance. 

Bitcoin continues to consolidate above the upper boundaries of its tight trading range.  Earlier news that JPMorgan is creating a Bitcoin fund for wealthy clients didn’t help Bitcoin break above the $40,000 level as this market remains fixated over what will be the fate of the dollar from tomorrow’s employment report. 

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