Gold Lower As Risk Appetite Returns, Bitcoin Rallies

March 22, 2022

76

By Anna Peel. Originally published at ValueWalk.

What Stagflation? Bullard being Bullard, Oil dips, Gold lower as risk appetite returns, Bitcoin rallies – OANDA

Equity traders are looking at surging global bond yields and are saying, “What, me worry?” The global bond market selloff is not easing at all and that should raise some red flags. Mad Magazine’s Alfred E. Neuman is what many stock traders are starting to look like when they buy every dip. Fed policy is about to become restrictive and commodity market tightness will still remain even if there is a quick resolution to the crisis in Ukraine. The bar is set high for the NATO summit to produce some coordinated effort that could bring us closer to an end to this war.

Q4 2021 hedge fund letters, conferences and more

It seems whatever economic weakness that is starting to arise is being shrugged off as hope grows that Russia has lost momentum in the war in Ukraine. Russian troops are not progressing deeper into Ukraine and Russia’s oligarchs and billionaires may find the upcoming round of sanctions from the US and EU to pose a great risk for their wealth. The impact from this war is anyone’s guess, but what we do know is that the longer it lasts, the greater the stagflation risk will be for the global economy.

More From The Fed

Fed’s Bullard reiterated that the Fed needs to move aggressively to get to a neutral rate. He added that they can’t wait for geopolitical tensions to ease and that they should get going on the balance sheet runoff. After yesterday’s hawkish encore performance by Fed Chair Powell and another round of Fed’s Bulllard, it looks like Wall Street is mostly convinced that the Fed will raise rates by a half point and announce the balance sheet runoff at the next policy meeting in May. Normally Bullard’s expectations for Fed policy is the most aggressive, but it seems he may be spot on for the May meeting.

Oil

After rallying since the middle of last week, crude prices declined as energy traders await what actions come from this week’s NATO summit. Crude supply shortage concerns were somewhat alleviated after reports that China is buying Russian crude at a big discount. It looks like two key economies, China and India are still buying Russian oil and that will likely put a halt to the recent rebound in prices.

The short-term crude demand outlook might need a downgrade soon as China is facing growing pressure from surrounding nations. The oil market remains very tight and completely fixated over every development with the war in Ukraine. If Europe decides they will move forward with a Russian oil ban, oil prices will skyrocket. Russian Deputy PM Novak noted that the course of action of a ban could send oil to more than $300 a barrel. If it seems likely an EU ban on Russian energy is coming, Brent crude could easily rally to record high territory above the $150 level.

Gas

It is worth nothing that the EU is making sure it will be able to have gas stored up for next winter. The EU has positioned itself to phase out Russian supplies as they’ve made progress with a draft summit statement on purchasing gas, LNG and Hydrogen.

Gold

It looked like gold was doing a nice job of not falling apart given the global bond market selloff, but surging stocks completely dampened demand for safe-havens. Today’s market moves are somewhat surprising, given rising bond yields and the resilience behind equities. Gold looks like it is on the ropes as surging yields, growing stagflation risks, and nearing a potential pivotal moment in West’s response in the Ukraine war. Gold should have decent support ahead of the $1900 level, but if that breaks, bearish momentum could get ugly fast. Gold should stabilize soon as this stock market rally should run out of steam.

Bitcoin

Bitcoin is a risky asset and is enjoying the green across Wall Street. Risk appetite is here as economic/military pressure grows on Russia, which raises prospects this won’t be a long war, Nike gave a strong outlook, and as surging Treasury yields have yet to deter investor appetite for risk.

Crypto headlines were limited but did include ECB’s Panetta comment that said they need to be mindful of increased threat of cyberattacks and that crypto assets must not become a sanctions loophole. Bitcoin is once again nearing the upper boundaries of its $37,000 to $45,000 zone, but still doesn’t have a clear catalyst to break it.