Oil shorts are in control, Gold and Bitcoin remain heavy

• Oil’s 4% drop takes prices to a three-month low
• Gold lower but still holding key range
• Bitcoin remains heavy as some traders move to DeFi exchanges

Oil

Oil has easily become a favorite short on Wall Street.  The oil market doesn’t appear like it will get tight anytime soon on fears that China’s weak post-COVID recovery won’t be improving anytime soon and as Russia continues to sell more oil to China and India. In addition to all the bearish drivers, some notable oil bulls are abandoning their aggressive bullish calls.  Goldman Sachs lowered its Brent outlook for the end of the year from $95 to $86 a barrel. Just last week, Goldman’s Currie was talking about seeing substantial physical draws in Q3 or Q4, which could support oil back to the low $90s. 

With every energy trader buckling up for a massive week of central bank rate decisions and important economic data, volatile price action should be expected. Oil could get many conflicting signals this week as we are expecting a hawkish skip by the Fed, another ECB rate hike and a signal for more tightening, possibly a technical recession for New Zealand, and a growing case for easing by the PBOC.  The global economic outlook should be for more crude demand destruction to occur, which could support oil prices remaining under pressure unless OPEC+ signals and delivers on more production cuts. 

Gold

Gold prices edged lower on expectations the Fed will deliver a hawkish skip. First, we need to see inflation cooled in May, before we can talk about a hawkish Fed skip. Wall Street will still likely anticipate that rates will remain elevated a while longer and that is keeping gold prices under pressure. 

With stocks in bull market territory, demand for safe-havens has disappeared.  Gold either needs investors to get nervous about earnings, disinflation trends to improve, or for the PBOC to send a strong message that they will energize growth. 

Gold is getting dangerously close to the $1950 support level and if that doesn’t hold, it could pave the way for momentum selling towards the $1900 region. 

Crypto

Bitcoin remains heavy as investors pile back into MegaCap tech trades and 5% interest income from CDs. The Cryptoverse is stuck in limbo as regulatory fears run wild and as some investors abandon certain key exchanges. Mainstream acceptance for crypto won’t occur with DeFi. While experienced crypto traders move more their trading volumes onto DeFi, this is not good news for long-term growth and for attracting new investors.  Ahead of a key CPI report and Fed decision, Bitcoin has key support at the $25,400 region.

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