Commodities and Cryptos: Oil stumbles on demand woes, Gold’s flash crash, Bitcoin rally

Oil

Crude prices are declining as a slowdown in Asia disrupts the demand outlook.  The oil market is still in deficit but demand risks and possible resurgence of Iranian crude is keeping prices heavy.  A stronger dollar theme is starting to emerge given the recovery story in the US and that might be a short-term drag for crude prices.

WTI crude is paring losses following the overall rebound across commodities and after testing some key technical levels.  With inventories remaining tight, further downward pressure on oil might be limited.  WTI crude has strong support at the $65 level, but if that breaks it could get ugly very quickly as not much support is there until the $60 level.

Gold

Gold’s overnight flash crash was a perfect mix of Asia playing catchup over with their Fed taper bets, plunging commodities as slowdown concerns grow across Asia, and some thin conditions given the holidays in Japan and Singapore.  Gold is in trouble now that Wall Street is convinced that the Fed will taper its QE program soon, potentially driving Treasury yields and the dollar sharply higher.

Gold’s short-term outlook turned bearish but given the Fed will be hesitant in saying what taper means for signaling rate hikes, the downward move might soon show exhaustion. The stimulus trade will still be there for gold, it just won’t include the US since growth concerns in Asia remain relevant.  Also adding to longer-term support for the industry is that the miners will not see any significant growth in production.

Cryptocurrency

Bitcoin is surging as senators continue to argue over how crypto taxation will help pay for President Biden’s infrastructure bill.  The White House clearly supports the not-so crypto friendly Warner-Portman-Sinema amendment, which would deliver strict crypto reporting guidelines that would make it impossible for most miners and developers to survive.

The Senate reportedly have reached a deal over the crypto amendment, which allowed many software developers to breathe a sigh of relief.  The amendment over digital asset taxation got done before the final vote on the bipartisan infrastructure bill and it’s good news for the long-term outlook for the cryptoverse.  There seems to be a lot of support to not kill the crypto industry and that the strict crypto provisions will be avoided.

Bitcoin and Ethereum are surging higher as optimism grows they are clearing a first big hurdle in taxation.

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