Commodities and Cryptos: Oil rebounds, Gold softer, Bitcoin rebounds

Oil prices rebounded for two key reasons: the Omicron variant seemed like it would most likely be short-term disruptive to the crude demand outlook and on growing expectations that OPEC+ will refrain from increasing production by 400,000 bpd.

The Chairman of the South African Ministerial Advisory Committee on Vaccines noted that the cases so far had all been mild, mild -to- moderate which was a good sign. As long as South Africa does not see a massive uptick in hospitalizations, optimism will grow that this new variant won’t lead to a wrath closing of borders.  Highly vaccinated countries will continue to thrive and political pressure will grow to get those countries with low vaccination rates more supplies.

OPEC+ pushed their meetings to better assess the impact of the Omicron variant, which will most likely be followed by a delay in delivering an extra 400,000 barrels a day in January. Following the global strategic reserve releases and the announcement of dozens of countries restricting travel to and from South Africa and neighboring nations, OPEC and its allies can easily justify an output halt or even a slight cut in production.

Crude prices gave back some of its gains after the US State Department advisor reminded traders the US could release more oil.

Gold

Gold prices remained heavy as the Omicron panic eased, the dollar rally returned, and after another round of strong US economic data. Wall Street is quickly shaking off last week’s de-risking theme that triggered safe-haven demand for bullion. President Biden said economic lockdowns in response to the Omicron variant are off the table, which means gold could be in trouble if this latest variant mostly yields longer supply chain issues that might fuel the ‘inflation is persistent’ argument. If supply chain issues deteriorate even further, that could lead to faster tapering and quicker rate hikes by the Fed.

Cryptos

Cryptocurrencies are rebounding after last week’s widespread panic-selling from the Omicron variant blew past many stops. The crypto selloff was an overreaction and buyers are quickly reemerging as traders reassess the impact of a new coronavirus variant. Bitcoin is a part of today’s broad risk rally that stemmed from easing COVID fears but will likely struggle to completely get its groove back until vaccine efficacy results in the coming weeks confirm highly vaccinated countries are going back to lockdown mode.

Bitcoin rose 3.5% to $58,284, which makes the year-to-date gain at 101%. Ethereum is back above $4400 and is almost 500% higher this year. The top two cryptos seem like they may consolidate here, but if the Fed accelerates their taper plans and prospects of rate hikes grow, a return to record highs seen earlier in November will be hard to do.