Commodities and Cryptos: Oil falls on COVID concerns, Gold loses shine to silver, Bitcoin gets another endorsement

Oil

Crude prices ignored a weaker dollar and declined on COVID variant concerns.  The energy market is completely fixated on the short-term crude demand outlook and today’s headlines from the US and Israel disappointed.  The South African virus variant has spread to South Carolina, infecting two people that have no travel history there.  If the virus is spreading across the community, we could see harsher restrictive measures imposed soon. 

Israel has been the shining example on how to distribute COVID vaccines, but their early success is not delivering a sharp decline in new cases.  Israeli officials have noted that current lockdowns have not reduced infections due to the virus variants.  Israel will be the template every bases their reopening strategies and despite having over 30% of the population vaccinated, they still don’t have a strong handle of the virus. 

WTI crude is lower but by no means is showing any signs of triggering a major pullback.  The OPEC+ production strategy is still working and hopes are high we will get J&J’s vaccine approved sometime next week.  WTI crude should remain confined to the low-$50s, but if China’s COVID deteriorates that could be the tipping point for a significant pullback towards the mid-to-high $40s. 

Gold

Gold has tentatively lost its mojo as US stocks resume their climb higher and as “little sister”, silver gets an endorsement from the Reddit army of traders.  Gold initially soared higher following softer-than-expected US GDP data and improving jobless claims data that still remains elevated.  Personal spending weakness however stood out and reinforced the Biden administration initiative to provide more fiscal support to Americans. 

Gold’s fundamental trading driver mechanism appears broken, but that should not last much longer.  Gold has weathered waning demand as institutional investors focus more efforts on the recent volatility that stems from the retail traders that are trading heavily shorted stocks and now silver.  Gold volatility will remain elevated, but buyers will emerge on lingering short-term risks to the outlook that include disappointing global vaccine rollouts and virus variant lockdowns. 

Gold needs to recapture and hold the $1,850 level otherwise bearish momentum could trigger a tentative plunge below $1,800. 

Silver stole gold’s thunder today and is 4.5% higher as some Reddit-fueled traders quickly move across to commodity trading.  

Bitcoin

Bitcoin is rising higher after converting another crypto-skeptic, billionaire Ray Dalio into a digital asset believer.  The founder of Bridgewater Associates recently argued against Bitcoin but this about-face will likely trigger millions of dollars into cryptoverse once he gets his new funds up and running.  Dalio’s earlier concerns of volatility, lack of mainstream acceptance, and regulatory fears have been alleviated over the past month and that should spell good news for the entire crypto space. 

Bitcoin remains stuck in the $30,000 to $40,000 range, but if price action continues to distance itself from the lower boundaries, the longer-term bullish trend could be greeted with strong momentum trades.  Institutional interest in Bitcoin is not ebbing and that should be very positive for the case for another run at record high levels. 

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