Commodities and Cryptos: Oil wins, Gold declines as yields rebound, Bitcoin steadies

Oil

All crude prices do is win win win no matter what.  Even as energy markets try to price in some extra barrels of crude from Iran, most oil headlines have been bullish.  Today, OPEC+ preliminary estimate for May compliance remains high at 115%, three Norwegian labour unions could strike on June 17^th over wages, and as IEA expects global oil demand to reach pre-virus levels next year.  

WTI crude is back above the $70 level, and they may stay there if Iran nuclear talks continue to drag on.  A breakthrough could happen next week, but the risks of extending talks are growing.  Yesterday, energy traders hit the sell button after some sanctions were lifted.  Later, it was realized that the State and Treasury Departments unveiled new sanctions over a dozen Iranian individuals. 

The crude demand recovery is looking so strong that even if Iran output sees an extra 500,000 bpd returned by the third quarter, Brent could top $80 by the end of the year. 

Gold

Gold is ending the week on a down note as Treasury yields rebound.  Gold’s best friend is an uber dovish Fed and that could be at risk next week.  Expectations remain that the Fed will stick to the ‘inflation is transitory script’ is high, but recent gains in labor and a red-hot inflation number will raise the risk that the Fed will be less dovish. 

Gold remains stuck in a range and will struggle to break out dollar weakness resumes.  With three-month volatility on the component currency-weighted Dollar Index plunging to the lowest levels in over a year, range trading may last a while longer. 

Gold still has a lot going for it, but trade leading up to the FOMC decision could see prices settle between the $1,870 to $1,900 trading range.    

Bitcoin

Bitcoin remains stuck in no man’s land.  Excitement from El Salvador’s decision to make Bitcoin legal is waning as the crypto world waits to see if other countries follow suit.  No one is denying that the developing world will likely continue to embrace Bitcoin, but the big question on Wall Street is when will the institutional buyer return.  A JPMorgan analyst warned that a Bitcoin bear market could be on its way and not many would argue that if Bitcoin struggles to attract new investors. 

Bitcoin is surviving a difficult environment as regulatory fears intensify and the rush to reduce its carbon footprint grows.  The China crackdown led to the creation of the Bitcoin Mining Council which for the most part has alleviated some traders’ fears.  If the council can prove to corporate America that miners are using less computing power and energy to verify transactions, that could be what is needed to start attracting big money.  

Bitcoin’s $30,000 to $40,000 trading range should remain intact a while longer. 

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