Novak and USD crush oil prices, Gold and Bitcoin diverge

• Dollar rally sends gold to lowest levels since March and the yen to the weakest levels since November
• Russian/Saudi in focus as Novak clarifies earlier comments
• Bitcoin outperforming gold as it continues to hold onto critical support

Oil

Crude prices are weakening as king dollar returns and after Russia slashes any Saudi hope of delivering another production cut at the June 4^th meeting.  Russian Deputy Prime Minister Alexander Novak said, “I don’t think that there will be any new steps, because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries. The Saudis were trying to talk up oil prices and dangle a threat of more production cuts, but it looks like Russia won’t be on board for additional cuts.

OPEC+ watchers always pay close attention to Russia-Saudi communication as a rising rift could bring back the risk that the 23-nation alliance could fall apart.  Novak somewhat took back his comments this afternoon.  He noted that Russia and OPEC+ will make a decision on what is best for oil market, adding that OPEC+ can make a decision at the June meeting if necessary.

Gold

Gold prices continue to weaken after a plethora of economic data supported the argument that the economy will continue fuel inflationary pressures and warrants more Fed tightening.  It looks like Wall Street is pricing in one more Fed rate hike as the consumer is too strong and that won’t quickly change as the labor market is only slowly weakening.

The dollar continues to rally but that should not last once debt ceiling drama gets uglier.  If yields on short-dated Treasuries continue to rise that will eventually spell trouble for the dollar.

If stocks continue to rally, that could keep the pressure on gold, with key support coming from the $1950 region.  The next round of inflation data might not do gold any favors, but eventually significant debt ceiling market stress should lead to some safe-haven flows for bullion.

Bitcoin

Bitcoin is hovering above the $26,000 level as traders await to see if increasing bets on Fed rate hikes will continue to drag down cryptos.  Bitcoin is performing better than gold as investors struggle with assessing recessionary fears, positive flows into stocks,  and overall optimism that the US won’t default.  Debt ceiling angst remains despite all the optimistic comments from Speaker McCarthy. This latest round of dollar strength probably won’t last and it will be interesting to see if market stress eventually triggers flows back into crypto.

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