Commodities and Crypto: Oil Going Up, Gold Going Positive, China’s Bitcoin Strike

oil

Crude oil prices continue to rise as both short-term supply and demand fundamentals suggest that the oil market will remain tight throughout the winter. The outlook for raw demand becomes very optimistic as some scientists’ models predict a steady decline in COVID cases through March. Vacation bookings will continue to pick up, helping demand for jet fuel, and a truck demand crisis is likely to keep diesel demand very strong.

The icing on the cake for the optimistic outlook is that low natural gas supplies and a cold winter could mean additional demand for crude oil as an alternative energy source for the northern hemisphere. Today’s rally in crude oil prices is impressive as it has risen steadily this week, along with a strengthening dollar that usually dampens the attraction to commodities. Oil prices have one direction for the rest of the year, and that is higher.

Ahead of the New York opening, WTI crude softened after Iranian Foreign Minister Hossein Amirabdollahian said talks on a nuclear deal with Iran would resume soon. Expectations for sanctions easing for Iran have declined since the day of Iran’s inauguration. The negotiations will be a lengthy process that will likely need to be followed before the US imposes sanctions. Extra Iranian barrels of crude doesn’t seem like a 2021 story.

gold

The gold price turned positive after Evergrande’s problems spread beyond China. US Evergrande investors have reportedly not yet received interest payments, and China Evergrande New Energy Vehicle Group Ltd is seriously short of money. It looks like China will not save Evergrande but will try to contain all systemic risks, which should result in some safe havens for gold bars.

Gold has struggled against a stronger dollar due to soaring post-Fed government bond yields. Gold is in a very tough spot and volatility will remain high with risks on the downside. The U.S. growth story will continue to improve if COVID modelers are right with a steady decline in COVID cases through March. If Evergrande’s fallout is contained over the weekend, gold could be vulnerable to testing the $ 1,700 level.

Bitcoin

Bitcoin was dealt a severe blow after China’s central bank said that all cryptocurrency transactions are illegal and must be banned. Bitcoin initially fell over 5% and the other top coins fell around 10%. Overseas exchanges providing services to Chinese residents are illegal and also target Chinese nationals working on these exchanges who are at risk of investigation. Bitcoin, Ethereum and Tether have been specifically named as cryptos that cannot circulate in China.

Beijing has withheld the ban on owning cryptocurrencies, which would have dealt a massive blow to the entire crypto space. A ban on owning crypto would likely have sent all crypto 20% lower. If you are a Chinese crypto holder, you may decide that now is the right time to withdraw. Three years ago, crypto was heavily centralized in China, with more than two-thirds of its mining happening there. If Chinese crypto owners fear that a “ban on ownership” is looming, there can be enormous sales from old wallets.

Bitcoin remains extremely vulnerable if it breaks the $ 38,000 mark, which could lead to a momentum sale to the $ 35,000 mark.

This article is for general informational purposes only. It is not an investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily those of OANDA Corporation or any of its affiliates, subsidiaries, officers, or directors. Leveraged trading carries a high level of risk and is not suitable for everyone. You could lose all of your deposited money.

With more than 20 years of trading experience, Ed Moya is a senior market analyst at OANDA providing up-to-date intermarket analysis, coverage of geopolitical events, central bank policies and market reactions to company news. His particular expertise lies in a variety of asset classes, including forex, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokers, research teams, and news departments on Wall Street, including Global Forex Trading, FX Solutions, and Trading Advantage. Most recently, he worked at TradeTheNews.com where he did market research on economic data and company news. Ed is a New York based and regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most prestigious global news outlets, including Reuters, Bloomberg and Associated Press, and he is regularly cited in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

Ed Moya

Ed Moya

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