Oil Weakens on Weaker Global Growth Outlook, Gold and Bitcoin Unfazed
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- Commodities get little support from a weaker dollar
- Demand destruction likely to force Saudis to extend cuts
- Bitcoin holds onto the $30,000 level
Oil
Crude prices are weakening as concerns mount that the global growth outlook is getting uglier by the day. China is rushing to deliver more support to their real estate crisis, while the US starts to grow more nervous about a potential recession. Oil will struggle this week if inflation readings in the US support the hawkish case for a couple more rate hikes, while Euro-area industrial production remains lacklustre.
A bullish backwardation structure should help WTI crude find a home above the $70 level, but it seems unlikely that the demand outlook will get any good news this week. Recession risks might rise, but it seems energy traders are confident OPEC+ will keep supplies tight.
Crude Oil
Gold
Gold prices are hovering at last week’s low as traders await a pivotal inflation report that could seal the deal for a couple more Fed rate hikes. Bullion traders want to know if core CPI will show persistence and raise the odds that the Fed will not just go in July but more likely also in September. Even if we get a hot report, the Fed is locked into delivering a quarter-point rate rise. Following last month’s pause, the Fed seems positioned to remain aggressive with signaling tightening until we see a much more meaningful slowdown. Gold might end up trading rangebound this week, but the $1900 level should hold as long Wednesday’s inflation report is not scorching hot.
Bitcoin
Bitcoin remains stuck around the $30,000 level as Wall Street awaits any US Bitcoin ETF update and as market expectations for a 25 basis point hike at the next Fed meeting seem very likely. Stocks are looking a little toppy ahead of earnings and that might mean risk aversion might be ready to make a return. Bitcoin got a strong vote of confidence from Standard Chartered, with a price target of $50,000 this year and $120,000 for 2024. Miner profitability was one of the key reasons for the elevated price targets, but that might not be as easy as electricity costs grow and over surging debt payments
Bitcoin appears locked in a range, but that might continue as we may have to wait months before getting any concrete ETF updates.
