Economic jitters hurt oil and boost gold, Crypto unfazed

  • Recession risks drive safe-haven flows gold’s way
  • Oil has worst weekly decline since May
  • Bitcoin tests highest level in a year

Oil

Oil prices are declining on fears that a European recession and delayed stimulus from China will spell trouble for the global growth outlook.  Next week, the heads of the major central banks will gather in Portugal and likely signal a commitment to tackle inflation with aggressive rate hikes.

Energy traders are worried that the Fed and friends might cripple economic growth in the second half of the year. The upcoming week contains Energy Institute global energy outlook that could become a lot more pessimistic and the World Economic Forum’s New Champions meeting, which will focus on energy transition.

NatGas

There was a brief relief with European natural gas prices this week.  The current pullback could easily be disrupted as the supply situation remains very tight.  The risk of outages and increased demand could be triggered by a hot summer, which could send supplies much lower ahead of next heating season.be triggered by a hot summer, which could send supplies much lower ahead of next heating season.

Gold

Gold has had a couple of rough months as Wall Street started to price in much more aggressive central bank tightening across Europe. The dollar has been rallying on strong demand for Treasuries as investors worry about the global growth outlook.  After tumbling to the $1920 level, gold is starting to attract safe-haven flows as the stock market selloff intensifies.

Gold got an added boost after the Fed’s Bostic said he favors no more rate hikes for the rest of the year. The rebound however lost some steam after the latest PMI data isn’t showing enough weakness in the service sector to warrant a pause.

Next week, will be key for Fed rate hike expectations as we get the PCE readings and hear from Fed Chair Powell again.  If swap futures start to believe the Fed will likely deliver two more rate increases, gold could remain vulnerable. However, if risk aversion runs wild, gold could see some flight to safety flows. Gold has key support at the $1900 level and resistance at the $1960 region.

Bitcoin

The crypto market is still buzzing over the potential launch of a US Bitcoin exchange-traded funds.  First it was BlackRock and now WisdomTree and Invesco are filing their ETF applications.  As the economic resilience of the US ends, it will be interesting to see how Bitcoin and all the other top cryptos perform.

The use case for cryptos is slowly making progress as JPMorgan has expanded their blockchain-based token to euro payments. Bitcoin is hovering around the $30,000 region and traders are becoming optimistic that a path to $40,000 is forming.  With a de-risking moment occurring on Wall Street

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023.

His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.

Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.

Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.

Ed holds a BA in Economics from Rutgers University.

Ed Moya

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