March is coming to an end, and so is the turbulent first quarter of 2021, which mainly brought a rise in US bond yields, a strengthening of the USD, a fall in gold prices, a rise in oil prices or cryptocurrencies.
In the quarterly chart, of the popular markets, the one that seems to have gained the most is crude oil with an increase of over 25%. We are talking about the barrel of WTI, which at the beginning of the year still cost a little over 45 USD, to reach a price of over 60 USD at the end of March. At the other extreme, in the commodities market, is gold, which seems to have lost more than 11 percent in the quarter, falling below $1,700. On Wednesday, the gold price was near $1,680 per ounce, staying close to levels not seen in 3 weeks amid a strong U.S. dollar and Treasury bond yields as investors continue to believe that further fiscal spending will result in a strong U.S. economic recovery. President Joe Biden is expected to unveil details of a new stimulus package with a focus on infrastructure to the tune of over $2 trillion. The yellow metal lost about 11 percent in the first quarter of the year, the biggest quarterly decline in more than 4 years.
The situation in this market seems to be dependent on events in the US bond market, among other things. The yield on the 10-year Treasury note rose this quarter to a 14-month peak of 1.776 percent, which could mean that the yield on the 10-year note rose 83 basis points in the first quarter of the year, the largest increase in more than a decade. Meanwhile, gold appears to be dependent on real interest rates, or the difference between inflation expectations and bond yields. To the extent that inflation expectations are rising, the rapid rise in yields is offsetting it, plus it could translate into a stronger USD, which in turn may have pushed gold prices lower this quarter.
Meanwhile, in the broad currency market, the dollar seems to have gained almost 4% this quarter and this could be perceived as corrective USD appreciation due to the previous trend since March 2020. Back then, the dollar seemed to be losing value, and now some of those losses may be making up for it. It also seems that with the end of this quarter the wave of USD appreciation may also come to an end, which we may possibly see in the first two weeks of April.
In the cryptocurrency market, which by returns seems to dominate other asset classes, the price of bitcoin has risen by more than 100 percent in the last three months. At the turn of the year, 1 BTC cost about 28 thousand USD. It is currently oscillating in the $58K region and is vying for its biggest month of growth ever in dollar terms. There definitely seemed to be a growing interest in the cryptocurrency market this quarter from corporations, funds, and individual investors who may have been looking for alternatives to the paper money that is being created on a massive scale.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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