Oil rally, gold resilient, bitcoin unloved

European energy crisis deepens, while oil continues higher

Oil prices are higher again on Friday, continuing to trade around the highest levels seen in more than seven years. We could potentially be seeing some signs of exhaustion in the rally, with momentum indicators easing despite price continuing higher, but we’re not seeing it to any significant degree. Perhaps we’ll see more signs in the coming sessions but it’s hard to say with any conviction that prices won’t just continue to rally in the near term.

The energy crisis is also deepening in Europe, raising the possibility of outages this winter as already depleted reserves continue to be drawn upon. Friction with Russia over Ukraine, not to mention the Nord Stream 2 pipeline, make the prospect of emergency supplies unlikely any time soon. And further outages at nuclear reactors in France are just compounding the problem. European leaders will be praying for warmer weather over the coming months.

Gold showing incredible resilience

Gold is a little lower at the end of the week, once again running low on momentum as it approaches what has become a major technical resistance level around $1,833. Higher yields are at least partially responsible for the wind coming out of gold’s sails, although once again it’s showing considerable resilience given the reaction we’ve seen elsewhere.

If it can break $1,833, it will be a very bullish signal for gold, especially coming at a time when investors are pricing in more aggressive tightening from central banks. It seems to be relatively immune to higher yields, perhaps generating favour from its inflation hedge reputation. Are traders sending a signal that four hikes and balance sheet reduction this year won’t be enough to get to grips with inflation? Or shielding against potential declines in stock markets?

Bitcoin not feeling the love

Bitcoin isn’t feeling the love that’s coming gold’s way at the moment, despite the claim of it being gold 2.0. The cryptocurrency looks to be far more aligned with high-risk assets and is coming under pressure once more as interest rate fear spreads throughout the market. Bitcoin ran into resistance a little shy of the December support zone and could see $40,000 come under pressure once more. This level is likely to be heavily protected so it will take a big push to break that support. If we do see a close below, it could get a lot more painful for cryptos.

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