Cryptos and Commodities: Oil softer, Gold little changed, Bitcoin’s danger zone

Oil

Brent crude was ripe for some profit-taking after topping the $75 level.  Energy traders used the reports that OPEC+ is already talking over how much to further ease production cuts.  Oil prices have steadily risen on OPEC and allies’ gradual production increase plan that brought back 2.1 million bpd to the market from May to July.  Oversupply fears are not back just yet, but the harsh reality that oil-producing countries will be eager to secure market share should put a damper on $100 oil price bets.  OPEC+ is expected to meet on July 1^st.

The global reopening of the economy is key for the crude demand outlook, so China’s plan to keep the pandemic border restrictions for another year also was a drag on sentiment.  China is being extra cautious to protect the Winter Olympics in February and their once-a-decade power transfer.

Gold

Gold prices are in for a choppy period.  Gold sank early as the dollar rallied, but was unable to muster up any strength post Powell.  Powell’s comments assuaged investor concerns over a sooner-than-expected taper, but that mostly led to inflows to stocks.  Gold is in a tough spot as it is not likely to see inflation hedges right now or safe-haven flows as the US economy is getting closer to infrastructure spending.  Depending on how infrastructure talks unfold could dictate gold’s next major move.  A democratic infrastructure plan would keep that fiscal support punchbowl overflowing and likely drive gold higher.  If a bipartisan deal is reached the stimulus total would be cut more than in half.

Bitcoin

Bitcoin remains in the house of pain as cryptocurrency traders continue to face the harsh reality of life without Chinese support, less global fiscal and monetary stimulus, and uncertainty on whether an opposition group in El Salvador will be successful in proving President Bukele’s Bitcoin law is unconstitutional.

Bitcoin is in the danger zone and if the $29,000 level breaks, this time momentum traders might not hesitate a relatively quick plunge to the $25,000 level.  The bull case for Bitcoin is falling apart and some longer-term investors might worry that the $20,000 level might not be defended as short-term fundamentals continue to deteriorate.

Cryptocurrencies are crashing across the board when you consider how low all the top coins are down from their respective highs. Bitcoin and Ethereum are down over 50%, while Dogecoin has lost over 70% of its value since peaking in May.

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