Oil choppy, gold’s rough week, bitcoin blow

Oil choppiness continues

Oil remains choppy with China and the Fed creating a bit more two-way price action amid very tight markets. The risks are certainly more tilted to the upside, given the war in Ukraine and a potential embargo on Russian exports, but lockdowns in China and the risk of a Fed-driven economic slowdown are also significant.

Central banks may be targeting a soft landing while belatedly combating very high inflation but that is very hard to achieve and there are plenty of reasons to believe they’ll fail to do so again. The economy is very strong, as is the labour market, but both can only sustain so much tightening in a short period and we may soon see whether the Fed has left itself too much to do.

A rough week for gold

After a bright start to the week that saw it come within a whisker of $2,000, gold is on course to end it around 2% lower following another negative session on Friday. It’s continuing to be weighed down by a stronger dollar and higher yields as traders anticipate an aggressive tightening cycle from the Fed.

High inflation and an uncertain economic environment have been very supportive for the yellow metal and I don’t expect that to change but the more tightening markets price in, the more resistance we’ll see gold rallies. Of course, that may change if recession warnings start flashing but as yet, there remains some confidence that this can be avoided. The 5/30-year bonds have inverted again which may cause some alarm but at the moment, the 2/10 spread remains positive, just.

Bitcoin delt another blow but sees support

Bitcoin swiftly reversed course on Thursday after enjoying an encouraging recovery from the lows earlier in the week. We’re continuing to see very choppy trading in bitcoin and what was perceived as hawkish commentary from Fed Chair Jerome Powell seems to have been blamed for the latest swing. Reports that EU officials discussed banning bitcoin trading due to concerns over its intense energy usage may have contributed to the declines. Bitcoin did see support around $40,000 which could once again be viewed as an encouraging sign.

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