Oil rally peters out, gold pares losses, bitcoin surges

Oil runs out of steam

Crude’s steady ride higher appears to be running out of gas.  Much of the rebound in oil prices has been vaccine optimism, bearish dollar bets that is boosting commodities across the board, and as the Saudis lead the charge to drain global oil stockpiles.  Risky assets, including crude prices, are also benefiting from expectations the Biden administration’s looming stimulus package announcement is just the beginning of fiscal support that he will deliver.

Oil was unfazed from the latest OPEC monthly report that saw no changes in both the 2021 world oil supply and demand forecasts.  World oil demand is forecasted to rise by 5.9 million bpd for a total of 95.9 million bpd.  If J&J’s COVID vaccine gets the nod and has a successful rollout, that will help the second half of the year outlook for crude demand.

The medium- and long-term fundamentals still look good for oil but if global COVID lockdowns continue to grow that should disrupt the rally in crude prices.  German Chancellor Merkel reportedly wants to intensify lockdowns nationwide and France is expected to extend the 6 pm curfew across all of France, a growing theme across Europe that could provide marginal pressure on oil.

Gold pares losses after surge in jobless claims

Gold prices pared losses after initial jobless claims surged to the highest levels since August.  Gold continued to claw back the rest of its losses after Fed Chair Powell affirmed the bank’s dovish stance.  Powell reiterated that the time to raise rates is “no time soon” and outlined a strong case that it will take a lot of time of higher prices to believe inflation is persistent.  The Fed put is not going away anytime soon and that should be very good news for gold traders.

Permanent damage to the labor market will likely force regional Fed presidents to walk back their early comments on tapering bond purchases.  Business hiring will be sluggish until COVID is under control and that probably won’t happen for many months.

All the cool kids might be still going to bitcoin, but gold will remain a trusted option given the stimulus commitments by the Fed and Biden administration.  Regulatory risks are percolating for Bitcoin and gold’s underperformance should be short-lived as excessive crypto volatility will drive many investors to gold for their inflationary hedges.

Bitcoin shows gains

Bitcoin is rising today as Wall Street focuses on Biden’s new USD 2 trillion stimulus plan and as crypto-friendly Gary Gensler is expected to be named head of the SEC.  Stimulus targets could steadily increase on any setbacks with the coronavirus pandemic and that has been one of the fundamental reasons why many continue to pile into Bitcoin.

The ECB digital euro consultation also provided some skepticism for a euro coin as 41% wanted privacy protection, something ECB President Lagarde will surely advocate for due to her money laundering concerns over the crypto world.  Central banks are evaluating how to best approach their coin offerings and it seems they will struggle to compete with Bitcoin.

Bitcoin is back in bull-market territory.  Crypto volatility will not ease up anytime soon, so Bitcoin could easily jump back-and-forth from bull to bear markets.  The bitcoin consolidation in the USD30,000 to USD40,000 range could last a while longer, but if the liquidity crunch happens again, we could be talking about the USD50,000 level.

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