Commodity and Cryptos: Oil breaks out, Gold hovers, Cryptos lower

Oil

The best trade on Wall Street for many traders is the rally in crude prices and energy stocks. A lot of fundamentals just flipped to bullish and that could have oil prices continue to push higher. The Houthi drone attack on the UAE reignited worries about potential supply disruptions in the region. OPEC+ is falling short of hitting their production quotas and if geopolitical tensions continue to heat up, Brent crude might not need much of a push to get to $100 a barrel. It seems a handful of countries and regions, such as UAE, Libya, Kazakhstan, Canada and North Dakota can have a disruption in crude production at anytime from geopolitical tensions or due to cold weather.

The oil market will only get tighter as Asian demand improves and as many countries begin to pass the peak of the omicron variant.  Both the supply and demand crude fundamentals have turned bullish, which means the $90 level for Brent crude should be the next big test.

Gold

Overall, gold prices are clearly hanging in there given that Treasury yields have skyrocketed this month. Todays near 6 basis point move higher with the 10-year Treasury yield has 1.85% in sight, which is driving the dollar higher across the board. Wall Street is pricing in a much more aggressive Fed tightening strategy over these next several months as inflation runs wild.  The Fed supports the rates to move higher in the long-end of the curve, but not at this pace.  This bond market selloff will soon find support and Treasury yields will likely consolidate well before the 10-year hits the 2% level.

Gold is in for a choppy period, but the medium-term outlook still remains bullish if prices can hover around the $1800 level.  Gold will remain an inflation hedge for much of Latin America and the emerging world.

Bitcoin

Bitcoin edged lower alongside risky assets as borrowing costs continue to surge alongside energy costs. This week the focus for cryptos also includes a House panel review over how much energy is consumed using cryptos and the overall impact to the environment.  Also worth noting was a Bitcoin mining ban from Kosovo, as Europe’s energy problem continues to deteriorate.

Ethereum is also lower on the day as many crypto traders begin to diversify away from the top blockchain network and increase holdings in other altcoins that are still in their growth stage: Cardano has made a comeback, while Solana and Terra have been gaining momentum.

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