Commodities and Cryptos: Oil hit by profit-taking, Gold vulnerable, Bitcoin steady

Oil

Energy traders did not wait long to lock in profits.  After a fourth weekly gain, crude prices slumped after oil rig counts delivered their biggest increase in a month and as risk aversion sent the dollar higher.  The weekly Baker Hughes rig count rose from 503 to 512, a 1.8% increase.  Earlier, oil prices were under pressure on expectations that Russia’s fourth quarter crude exports will increase 3% from the prior quarter.  Russia won’t hesitate increasing production and this could lead to a return of tension at the OPEC+ output meetings.

WTI crude may consolidate over the next few trading sessions until the trajectory of the dollar is a little clearer.

Gold

Gold is still in trouble.  Gold prices are declining despite a large liquidity add by the PBOC, highest annual pace of inflation in the eurozone since 2011, and broad risk aversion.  Gold’s worst enemy is surging Treasury yields and right now that trade is gaining momentum.  Fed Chair Powell may have to come to the rescue for gold.  A November taper announcement is priced in but for gold to stabilize, the dot plot forecasts can’t shift rate hike expectations to the end of 2022.  Fed Chair Powell may stick to the dovish script and commit to a wait-and-see approach.

Gold is still vulnerable to technical selling and will not likely attract buyers until $1700.

Bitcoin

Bitcoin prices bottomed out after the Wall Street Journal reported that the “Biden administration is preparing an array of actions, including sanctions, to make it harder for hackers to use digital currency to profit from ransomware attacks.”  These potential actions by the US government would be going after the bad players and not necessarily targeting cryptocurrencies or the technology behind them.

Something needs to be said about how well Bitcoin is performing today despite a broad risk aversion theme on Wall Street.  Bitcoin’s fundamentals have it well supported right now, but it is still lacking a fresh catalyst to break above the $51,000 level.

Institutional investors are growing frustrated with gold and might be leaning towards increasing their crypto exposure.  Next week will be huge for the dollar and potentially and for risk appetite if the Fed sends Treasury yields higher with hawkish rhetoric.  Bitcoin may consolidate between $46,000 and $51,000 next week.

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