Commodities and Cryptos: Oil lower, Gold slammed, Bitcoin steady

Oil

Crude prices slumped as US offshore production gradually returns and after a strong dollar sent commodity prices broadly lower.  Normally, strong US data about the consumer and manufacturing supports oil prices, but today’s news shifted expectations on how soon the Fed will taper which triggered a move in the dollar. 

Despite dealing with Tropical Depression Nicholas, US production has been steadily returning.  Late yesterday, the Bureau of Safety and Environmental Enforcement (BSEE) reported 29.52% of the current oil production in the Gulf of Mexico is shut-in, which is a tremendous improvement over the 76.48% shut-in last Thursday.

Much attention is also falling on the House Oversight Committee widening of its inquiry over how big oil is spreading disinformation over climate change.  The hearings will drag in Exxon, Chevron, BP and Royal Dutch Shell executives.  Regardless of what unfolds with this probe, expectations will grow that energy giants will have further pressure to transition away from fossil fuels. 

WTI crude was ripe for a pullback, but that probably won’t last much longer as energy traders can’t look beyond how much this oil market is in deficit.  Oil prices won’t have to worry about a strong dollar theme since the Fed will be like a giant oil tanker and not be able to shift taper expectations to the earlier side.

Gold

Gold and silver got crushed after robust US economic data sent Treasury yields higher.  Over the past two weeks, gold was unable to muster up much of a rally despite growing calls for caution with US equities.  Gold has fallen to the danger zone and could easily plunge towards the $1700 level.  Gold is going to trade technically for a while and if prices close below the downward sloping trend line (approximately $1,750) from last summer’s record high, it might get very ugly for bullion holders. 

Gold weakness is persisting despite risk aversion across emerging markets, so tentative support from the $1745.50 level might be more of a dead-cat-bounce.  Gold will remain volatile now that it has clearly broken down from its consolidation pattern.          

Bitcoin

Bitcoin may want to stop being called digital gold.  Rising Treasury yields have boosted the dollar which has sent gold prices to the danger zone, while leaving Bitcoin mostly unfazed.  Bitcoin’s performance today is impressive given the broad weakness across all commodities.  Bitcoin was weighed down earlier after reports that China will intensify their crackdown over cryptocurrency mining. 

The cryptocurrency world is seeing the focus shift towards the altcoins.  Solana, a potential Ethereum killer, quickly became a favorite holding for many traders.  Solana’s 17-hour outage clearly showed the cryptoverse that it is not decentralized and is far from unstoppable as their network was unable to handle a surge in transactions.  Solana’s woes was good news for Ethereum and likely cements its leadership over the short-term. 

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