Commodities and Cryptos: Oil drops, Gold stumbles as yields rise, Bitcoin higher

Oil

Crude prices traded initially lower as a strong dollar returns and as big oil readies investments for new exploration.  French giant, Total is expected to unveil a $5 billion investment that will build a pipeline, export terminal to Tanzania.  The oil majors have had a couple solid quarters and are ready to resume capital expenditures.  The global economic recovery will see improved demand for crude in the summer months and supply shortage risks could emerge due to lack of investment during COVID-19. 

The crude demand outlook for Europe and emerging markets is still messy and until optimism returns, oil prices could remain heavy.

Oil prices rallied shortly after the NY open mostly on technical buying. Expectations are growing that that the EU is turning a corner in the fight against COVID and that sunnier days will be here next month. The EU is diversifying their vaccine supplies away from AstraZeneca and is expected to secure around 1.8 billion mRNA COVID vaccines that will solidify their supplies for 2022 and 2023. Earlier Germany announced the doubling of vaccinations and it seems that Europe is now aggressively whatever it takes to secure a better future. The J&J single-shot vaccine is also being reviewed by the regulator.

Oil is in for a choppy trade environment over the next couple of weeks.

Gold

Gold prices are falling as the dollar mounts a comeback and as US stocks continue to hover near record highs.  It seems that gold will continue to follow the bond market, which saw weakness after some hotter-than-expected PPI readings.  The Fed for most of the week has kept the bond market in check but that will get tested if US inflation heats up. 

The Fed can’t get anymore dovish, so gold investors will have to wait and see how the inflation story unfolds over the next few months.  Gold will have its day in the sun, it just needs the dollar to weaken and for Treasury yields to have a steady rise higher. 

A bottom is firmly in place for gold so buyers should emerge on every major dip.

Bitcoin

Bitcoin is higher despite a strong dollar and could be entering a healthy consolidation.  The inflation debate might trigger some flows for Bitcoin but nothing that will be the primary catalyst if prices resume the march into uncharted territory. 

Next week will be a busy week for the cryptocurrency world as Coinbase, the largest US crypto exchange goes public and as many central bankers speak on digital currencies.  A disappointing IPO or excessive concerns over enhanced regulatory oversight could weigh on Bitcoin and the other altcoins.

A wave of central bankers will talk about the future of digital currencies: ECB Board member Fabio Panetta speaks on digital currency and will likely reiterate the differences between cryptocurrencies and how the digital euro.  The Swiss National Bank Governing Board Member Maechler will speak on markets and digital transformation to money market managers.  She may discuss how testing will evolve using CBDC going forward following the success with wholesale transactions.  Euro-area finance ministers will meet virtually and review insolvency frameworks and the digital euro.  If digital euro is closer to launching next year, that could be a negative driver for Bitcoin and cryptocurrency mainstream acceptance.

Bitcoin needs another major Wall Street giant to embrace cryptocurrencies for prices to rally beyond the $60,000 level.  

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