Oil rebounds, gold higher, bitcoin’s competition

Crude prices rally

Crude prices are rallying following a weaker dollar but are nothing to brag about considering the slide seen at the end of last week.  COVID new variants from the UK and Denmark have the energy markets nervous that the short-term outlook could get a lot worse.  Both new variants are more infectious than the original virus and that could lead to the tightening of restrictions across the globe over the next couple of weeks.

Crude demand forecasts will see many updates over the first half of the year as no one can get a handle on when the tightening of virus restrictions will end.  The IEA monthly report trimmed their 2021 global oil demand forecast by 0.3 million barrels, bringing the recovery a 5.5 million barrel per day boost to 96.6 million this year.  Vaccine rollouts have mostly disappointed across the globe and new virus variant risks will hurt the recovery in the first quarter.

WTI crude seems destined to consolidate in the low-USD50s a little while longer.

Gold prices are rallying ahead of expected dovish testimony from Treasury Secretary nominee Janet Yellen and as pandemic restrictions tighten globally.  The advance in gold clearly followed the strong start in global equities, which saw the dollar decline against most of its major trading partners.

Yellen’s Senate confirmation hearing is expected to affirm the US commitment to market-determined exchange rates and support Biden’s USD1.9 trillion stimulus package proposal by telling lawmakers they need to “act big” with the next COVID relief bill.  Gold could see added gains if Yellen seems unconstrained about more spending and adding to the engorged balance sheet.

Much of Yellen’s dovishness is priced in, but it could still serve as a bullish springboard for gold as investors prepare for another wave of ultra-easiness now that the Fed and Treasury will have improved coordination.  Permanent economic scarring to the economy will keep fiscal stimulus coming for the next couple of years even as the US economy is clearly on the other side of COVID.

Gold could see steady inflows as virus restrictions tighten across the globe and eventually trade between the USD1850 and USD1900 trading range.

Bitcoin is higher today but completely underperforming to its rivals.  Ether, Polkadot, Litecoin and many others are all surging as crypto investors anticipate a consolidation phase for bitcoin.  It seems ballooning deficits and inflationary pressures are taking a breather in sending bitcoin higher.  The cryptoverse is growing again and right now many cryptocurrency traders are diversifying into other coins out of fear that bitcoin could see another collapse if USD41,500 is not reached sometime soon.

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