Crude prices are lower after Libya’s largest oil field resumed production, Kazakhstan’s TCO oilfields are back to normal levels, and China’s zero-COVID tolerance, which will lead to new restrictions. The oil market will likely remain very tight as the world learns to live with COVID. Travel bans will continue to be lifted as the focus will go to testing, and that should do wonders for international travel once test makers have a better handle of the situation.
Considering how much oil prices rallied last week, the current weakness is somewhat limited given how tight this market is still expected to be throughout the first quarter. WTI crude may continue to drift here until a better understanding is had of how successful China is in preventing the further spread of Omicron.
Gold
Gold prices are steady despite a continued Treasury yield surge as Wall Street prices in more Fed rate hikes this year. Gold prices are not performing too terribly, with global bond yields hovering near pre-pandemic highs. The Fed can control the short-end of the curve, but the back-end is a different story. The balance sheet runoff is the big question mark, and that will likely drive the flattener and have many investors needing an alternative safe haven such as gold at some point this year.
Now that the Fed is rushing to get rates neutral and to start shrinking the balance sheet, the yield curve could flatten more, which is good news for gold.
Bitcoin
Bitcoin and Ethereum got knocked down early as Treasury yields surged as expectations remain strong that inflation will not ease anytime soon, prompting the Fed to deliver more than a few rate hikes this year. Everyone was expecting one more major slide before crypto traders would be willing to test the waters. Bitcoin’s plunge below $40,000 was short-lived, as was Ether’s drop below $3,000. The top two cryptocurrencies have an uphill battle to return to their respective all-time highs.
The cryptoverse is now providing more investment opportunities, including NFTs, metaverse bets, and several altcoins that are making a run to become the next big blockchain.
Short-term volatility will remain elevated for Bitcoin and Ethereum, but the outlook still looks bright for long-term holders.