Oil
Crude prices are consolidating as energy traders process the IEA’s 10-point plan to reduce oil consumption and await to see if any progress in peace talks between Ukraine and Russia can be made. Oil will remain a volatile trade in both directions, but the geopolitical risks don’t seem like they will be going away anytime soon, so $100 oil is likely here to stay. Ukraine President Zelensky said he has no doubt Ukraine will become a full member of the EU and Russian President Putin reportedly accused Ukraine of slowing down peace talks with unrealistic proposals.
Oil seems like it still might head higher even if we see some demand destruction over the next couple of months. The oil market is still too tight and the likelihood of the US gaining Chinese support in making life harder for Russia seems less likely. A major de-escalation in the war in Ukraine still seems far away and that should keep the oil market supported here.
Gold
Gold prices declined as the dollar rallied across the board as the investors continued to digest the Fed’s new hawkish stance. The dollar is seeing massive inflows and that is short-term troubling for commodities. The dollar will benefit from a rapidly improving interest rate differential and steady safe-haven flows as investors grow worrisome over the war in Ukraine’s impact on inflation and ultimately growth. Gold normally struggles when Treasury yields are skyrocketing, but right now the flattener trade has provided some protection for bullion. The short-end of the Treasury has the 2-year yield go from 1.30% at the beginning of the month to 1.93%, while the 10-year rose from 1.70% to 2.14%. Eventually the closer that 10s and 2s get to inverting, that should provide a flight-to-safety that should benefit gold.
Gold may have a choppy short-term road ahead, with the $1900 level providing key support. To the upside, gold might find tentative resistance at the $1950 level.
Bitcoin
After so many financial market moving events, Bitcoin still seems to be stuck in no man’s land. Bitcoin’s key trading range remains the $37,000 and $45,000 zone. Crypto traders should be impressed that Bitcoin is still hovering around the $40,000 level despite a surging dollar, declining Bitcoin mining, and falling NFT interest. Bitcoin’s next major move will depend on if Wall Street is still able to throw billions of dollars at the space, which seemed like a foregone conclusion two months ago.
