Commodities and Cryptos: Oil extends gains as rig count dips, Gold volatile, Bitcoin exhaustion

Oil

Crude prices only have one way to go after US and European flash Manufacturing PMI data show activity still remains strongly in expansion territory.  Last night, President Biden prepared Americans to expect to be paying over $3 a gallon.  Biden noted that if the US taps the Strategic Petroleum Reserves, that will only help Americans by 18 cents a gallon. 

WTI extended gains after the weekly Baker Hughes crude oil rig count declined by two rigs.  US production was ramping up post-hurricane IDA but now seems to have plateaued.  

WTI crude has strong resistance from the $84 level, but that might not hold next week.  Both supply and demand side drivers remain mostly bullish and unless the north gets warmer weather forecasts, $90 oil seems inevitable.  

Gold

Gold was having a nice Friday after another round of earnings made some investors boost their inflation hedges, safe-haven demand improved as Europe and Asia are still battling COVID, and as easing fears over China’s property sent the dollar lower.

Fed Chair Powell ended bullion’s strong finish after signaling they are ready to start tapering.  The removal of stimulus and the signal that rate hikes will likely be determined if inflation runs wild into the summer was the main driver that sent gold sharply lower. The front end of US rates dropped hard post Powell and that had gold drop over $30 before stabilizing close to the $1800 level. Gold will finish the week higher as it is starting to look attractive again for some investors.  Wall Street knows that negative real yields will remain well into next year and that that gold will reassert itself as an inflation hedge. 

Bitcoin

Bitcoin continues to drift away from record highs as exhaustion signs set in.  Bitcoin’s second future ETF disappointed as it provided an unwelcome dip on its first day of trade.  Both Valkyrie Bitcoin Strategy ETF and the ProShares Bitcoin ETF are trading below their trading debut levels. 

A healthy consolidation should be welcome news for Bitcoin bulls, but a break below $60,000 might unnerve some short-term traders.  Bitcoin won’t make a run towards the $70,000 level, until the next wave of Wall Street buys actual Bitcoin and not just this new wave of products.

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