Commodities and Cryptos: Crude pares losses after explosion in Donetsk, Gold hovers near $1900, Bitcoin below $40k

Oil

Crude prices reversed earlier losses after reports of an explosion in the center of separatist-held city of Donetsk in east Ukraine. Oil had been pulling back over the past couple of days as energy traders took some risk off the table and over improved expectations that Iran is getting closer to reviving a nuclear deal.

The Ukraine situation has totally stolen all the attention away from how tight the oil market remains.  As global covid cases continue to decline, crude demand should improve which means added pressure for the supply side.  US oil production is struggling to increase and with OPEC+ likely to struggle hitting their quotas, which means whatever dip in crude prices we see will be temporary. 

Gold

In just a couple of months, investors have done an about-face with gold. Wall Street has gone from expecting robust economic growth around 4% this year and a return to normal next year, to fears that aggressive Fed tightening could invert the curve next year and send this economy into a recession early in 2024. 

Ukraine tensions remain the primary driver behind gold’s earlier rally above the $1900 level.  Expectations are growing for some type of ground conflict after Separatist leader Pushilin announced an evacuation of Eastern Ukraine residents to Russia and following reports of an explosion in separatist-held city of Donetsk.   

Gold prices have had quite a February and should find key resistance around the $1930 level.  With Monday being a holiday in the US that might hold if Ukraine tensions do not escalate further. 

Bitcoin

Bitcoin is an unwilling participant in the volatility that is hitting all risky assets from Russia-Ukraine tensions. Bitcoin’s rollercoaster ride won’t end anytime soon, but it could get ugly if Wall Street sees a major selloff if investors begin to expect a prolonged military conflict. Bitcoin could be the victim of a scramble for cash, but once that panic selling passes, long-term bets would quickly return. Hodlers may be tested shortly.    

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