Oil
Crude prices are holding up despite new COVID lockdowns in China and after both a hot inflation report and abysmal consumer sentiment survey suggests the US consumer is weakening. Oil was boosted earlier after the Saudis delivered less crude than what was asked for by the Chinese. The oil market is still very tight and the eventual weaker US consumer won’t really take effect until closer to the end of the year.
Despite a sharply strong dollar, WTI crude is only down a tenth of a percentage point. Some traders are entering de-risking mode as prospects for the economy continue to dim, but no one really wants to abandon the best trade of the year, which is oil and energy stocks.
Gold
Gold’s reaction to the inflation report was a rollercoaster ride as traders tried to assess the near-term and long-term shifts with expectations for Fed policy. The initial shock of a scorching hot inflation report sent gold prices to fresh session lows as traders quickly bumped up Fed rate hike expectations for the September meeting. Then the 5-year and 30-year Treasury yields inverted and growth concerns triggered some safe-haven flows for gold.
Gold traders knew that a hot inflation report would be troubling and technical selling might remain strong. King dollar is back and with more rate hikes getting priced in for the Fed, gold could be vulnerable to retest the May lows.
Gold pared losses after consumer sentiment fell off a cliff, prompting some traders to believe that aggressive tightening calls at the end of year may have been overdone.
Bitcoin
Considering all the selling happening on Wall Street, Bitcoin is doing ok. A very hot inflation report has sent Treasury yields at the short-end of the curve sharply higher and that killed risk appetite for equities and that dragged crypto lower.
Bitcoin is below the $30,000 level and further selling could send prices towards the $28,000 level. The $28,000 level is critical support for Bitcoin and if that breaks over the next few days, that could provide the catalyst for a weekend crypto crash.
A Bitcoin weekend collapse could see prices plunge towards the $25,500 area, with $22,500 being the most extreme scenario. Weekend crypto crashes sometimes are followed by a quick recovery, but the current environment and soft interest might make for a slow recovery.
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