Oil pares gains, gold’s pain, bitcoin surges again

Oil

Energy markets are focusing more on the deep freeze that is curtailing US production by a third and less on Saudi Arabia’s plan to ramp up production in the coming months.  Despite a strong dollar and expectations the Saudis will quickly take back their surprise 1 million barrel a day production cut, oil prices continue to creep higher.

The Saudi plan to increase production, however, is being spun as a sign that there is a lot of optimism for the global economic recovery.  The crude demand outlook should warrant the Saudi increase in output since Asia is winning the war on COVID, the US is headed in the right direction and Europe is slowly getting everything in order.

The debate on whether this is the beginning of a commodity supercycle is growing and that could support another 10% higher for crude prices.

Gold

Gold appears to be in freefall as the dollar rallies, Bitcoin hits fresh records, and Treasury yields pulled back from one-year highs.  The global economic outlook got a boost after European Commission secured hundreds of millions of COVID vaccine doses.  Virus mutations remain a risk to the outlook and could derail the reopening of the global economy, but for now that risk appears to be low.

If the brunt of the surge in Treasury yields is over, gold prices could start to show some signs of stabilizing, but right now technical selling remains strong.  If the USD1750 level does not provide an ounce of support, selling pressure could get ugly for gold.

Will Bitcoin keep moving higher?

Bitcoin is rallying after MicroStrategy had robust demand for their bond offering which will buy more bitcoin and after Gartner reported 5% of finance executives they polled are willing to invest in cryptocurrencies.  MicroStrategy priced USD900 million in its convertible debt sale, much higher than the planned USD600 offering.  Demand is strong for cryptos and MicroStrategy is completely taking advantage of this rally.

Gartner, a leading research and advisory company, reported that just 5% of finance executives polled in February 2021 said they planned to hold Bitcoin as a corporate asset in 2021.  The poll showed “77 finance executives (including 50 CFOs) this month showed that 84% of respondents said they did not plan to ever hold bitcoin as a corporate asset.”  The biggest risk for the executives was that Bitcoin’s volatility posed a financial risk.

If you are a bitcoin bear, this confirms the laundry list of reasons that this speculative mania will end abruptly.  The top concerns from the Gartner poll were: financial risk due to volatility, board risk aversion, slow adoption as an accepted form of payment, and regulatory concerns.  However, if a low percentage of companies are willing to bet on bitcoin or become crypto-friendly that could suggest prices could still run much higher.

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