Oil rises, gold pares gains, bitcoin momentum

Oil gains ground on strong demand

Crude prices just want to keep going higher.  Crude shrugged off a modest pullback earlier after European crude oil stockpiles fell 0.8% from December to 483.4 million barrels.  If global crude stockpiles continue to come down, that should keep oil prices elevated.

The EIA’s short-term energy outlook showed the persistent levels of COVID uncertainty continue to weigh on the demand outlook for the rest of the year, but that optimism is high for an even stronger rebound in 2022.  The EIA cut the 2022 world demand outlook by 180,000 barrels and now sees a 5.38 million year-over-year increase.  The world demand outlook in 2022 is expected to grow by 190,000 barrels, delivering a 3.5 annual gain.  The EIA targets Brent prices to average USD55/barrel in 2022, a most cautious forecast given the COVID uncertainty for the first half of the year.

Both WTI crude and Brent appear to be riding this reflation wave high, but it seems a new catalyst will be needed to take oil prices much higher from here.

Gold

Gold’s move higher is running out of steam as lawmakers start to dissect Biden’s USD1.9 trillion relief package.  While it seems very likely a massive stimulus package will get pushed through by mid-March, it seems President Biden’s willingness to negotiate will make the final price tag a lot closer to USD1.2 trillion.

Today is not a widespread risk-on trading session, but optimism persists that the monetary and fiscal stimulus in the US could help this economy run hot and that keep the inflation hedges flowing into gold.

Gold was in grave danger last week and it’s not out of the woods until it clears the USD1,855 region.  Fighting against a potential death-cross and a nagging dollar rebound, gold’s longer bullish trend should reassert itself if the current rebound continues for the rest of the week.

Bitcoin

Bitcoin is the epitome of the millennial momentum trade.  Today is day two of Elon Musk’s big USD1.5 billion bet on Bitcoin coverage.  Bitcoin’s social sentiment is off the charts and volatility will remain wild.  The next big move for Bitcoin could come if other companies follow Tesla’s lead in diversifying into cryptocurrencies and accepting them as a form of payment.  Given where prices have ended up, Bitcoin needs big-ticket retailers that sell cars or high-end luxury items to embrace crypto payments.  A few years Bitcoin failed at mainstream acceptance when Bitcoin was used for buying a coffee or beer.  Bitcoin needs a couple more big endorsements and that could be the key to take prices above the USD50,000 level.

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