Oil
Crude prices eased slightly ahead of a make-or-break moment for the US dollar, Fed Chair Powell’s expected pivot towards tapering. The dollar was boosted from some reflation bets, safe-haven flows, and as some investors scaled back on some risky assets. The dollar could remain supported heading towards Powell’s 10 am EST speech and that might keep all commodities slightly weaker.
WTI crude will likely start to hover around the $68 level until OPEC+ signals what they will be doing with production next month and whether Gulf of Mexico production gets disrupted as tropical activity picks up.
A big question for energy traders remains what will happen with Iran sanctions and if they are lifted how much crude could rush back to the market. Iranian Minister of Petroleum Javad Owji noted:
“Our effort is to strengthen Iran’s position in OPEC and take back our markets.”
The oil market is still heavily in deficit, but eventually Iranian crude will be a primary catalyst fueling oversupply fears later in 2022.
Gold
Gold prices were supported on safe-haven flows that came after a couple of Kabul explosions led to the loss of 60 Afghans and 4 US troops. Gold is clearly locked into wait-and-see mode over Fed Chair Powell’s Jackson Hole speech which will provide hints on how and when they will pull back monetary stimulus.
Gold has been falling as investors start to price in hawkish tones from Fed Chair Powell. Traders will pay close attention to his comments over inflation and if he is becoming more concerned over the amount of inflation, that could help take Treasury yields much higher, denting the demand for bullion.
Gold should still thrive during a tapering environment as Powell will likely disconnect tapering to rate-hike timing. Treasury yields will continue to rise, but not at breakneck speed, thus allowing bullion to still look attractive. Gold could see initial support at the $1750 level, with massive support laying at the psychological $1700 level.
Bitcoin
Bitcoin continues its retreat as Wall Street awaits Fed Chair Powell’s shuffle to the tapering crowd at the Fed. Bitcoin bulls are unfazed by the recent weakness and will likely resume buying if prices fall to towards $45,450, which would be a 10% correction from the recent high.
Bitcoin’s consolidation could last a little while longer, but the medium and long-term outlooks still remain bullish.