Mixed Outlook for Commodities: Oil Stabilizes, Gold Holds, Bitcoin Seeks Catalyst

Oil

Oil’s fourth straight quarterly decline should be its last one. WTI crude is trying to stabilize above the $70 level as the oil market is destined for a deficit in the second half of the year.  The crude demand outlook has too much doom and gloom priced in as the US and China outlooks should remain upbeat.  China might be buying cheaper discounted Russian crude, but soon they will require more and those purchases could broaden as they slowly deliver more economic stimulus. The key for oil will be if the Saudis remain aggressive in getting this market tighter with an extension or slightly deeper output cuts. 

The peak summer driving season is here in the US, but some travel plans might be impacted as more than a third of the US population are under air quality alerts.  The Canadian wildfire smoke is having the biggest impact from the Midwest to the East Coast.

Next week, the focus will be on the OPEC seminar, which will likely contain an update on what the Saudis are thinking for next month.  Saudi Aramco will also set prices for August, which will let us know how bad the demand situation has become or if they are going to get closer to competing with Russian prices. 

 

Gold

Gold is holding onto the $1900 level as inflation eases. This was another bad week for gold as risk appetite remained healthy as the big-tech trade won’t go away.  The Nasdaq has seen its value increase almost $5 trillion in the first half of the year.  Gold had its hands full with both a record first half for the Nasdaq and aggressive central bank tightening globally.  Some investors are turning cautious stocks as we are approaching what will be a very busy summer vacationing season.

It appears that gold might be able to hold onto the $1900 level if those odds for a second Fed rate hike by year end continue to come down.  Gold’s tentative rebound might face resistance from the $1900 level. 

 

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Bitcoin

Bitcoin is having a strong finish to the quarter as optimism grows that crypto won’t be regulated out of existence and as financial giants remain committed to the space.  The focus has been on a Bitcoin ETF approval in the US, but it is unclear how long it will take to get that update, with end of summer being most likely. 

Bitcoin plunged from the $31,000 level after the WSJ reported that the SEC said spot Bitcoin ETF filings are inadequate.  The regulator was commenting on BlackRock and Fidelity’s filings.  

Bitcoin trades around the $30,000 level, but a fresh catalyst is needed to spark bullish momentum above the $34,000 level.