Oil
Crude prices rallied after the EIA oil inventory report posted a much larger-than-expected draw and as the dollar remained soft for a fourth consecutive day. The energy market will keep pushing oil prices if global supplies continue to decline. The US crude inventories fell by 6.6 million barrels last week, much more than both the consensus estimate of a 177K draw and the API’s 3.5-million-barrel decline.
The EIA report was not completely bullish as exports fell almost 25% to the lowest level in weeks and gasoline demand was below 8 million barrels as winter weather kept many Americans off the road.
Oil prices should benefit a weaker dollar that stemmed from Fed Chair Powell’s comment that a full jobs recovery will recovery more government aid.
Gold
Gold prices got some support from Fed Chair Powell’s dovish comments that were mostly reiterations. Powell noted that the US is still far from a strong labor market, they will be patiently accommodative, and that QE will remain until substantial further progress is seen.
Earlier, gold skyrocketed higher after a weak inflation report signaled the taper tantrum might be further away than we are thinking. Inflation is undoubtedly coming but it is expected to be short-lived. If inflation takes a little while longer to heat up, that could let the punchbowl of stimulus to overflow.
The uncertainty of the labor market will remain elevated even as employees are able to go back to the office. A return to maximum employment is probably much further away as many businesses focus on automation and dealing with smaller workforces. The Fed put is not going away anytime soon and that should be very positive for gold prices in the long-term.
Bitcoin
The Bitcoin party looks to be over for now. After a laundry list of celebrities endorsed Bitcoin, it seems that skyrocketing move higher is over. Today, the cryptocurrency mania party got fresh endorsements from Lindsay Lohan, but a polite rejection from GM’s CEO Mary Barra. The story that will dominate today’s crypto news is Elon Musk’s tweet, “Bought some Dogecoin for lil X, so he can be a toddler hodler.” Dogecoin started off as a joke and Wall Street is getting frustrated that Musk continues to focus a lot of energy on it. Tesla stock plummeted 4.5% and settled around $810. Dogecoin popularity is off the radar, but it isn’t a viable cryptocurrency investment and will most likely hurt most retail traders.
Cryptocurrencies also got some scrutiny from Bank of Canada Deputy Governor Lane, who called the recent spike in cryptocurrencies “speculative mania”. The disdain for cryptos by central banks and governments will only grow as everyone races to develop their own digital coin. Bitcoin was first to the party and it won’t stop anytime soon unless you have more than a handful of major governments ban cryptocurrencies. Bitcoin was ripe for a pullback, but that will unlikely bring an end to the rampant popularity and relentless retail buying.
