Friday, 24 February 2017
What’s next? – GOLD, OIL 24.02.17
Gold dropped in early Asian trade on Friday as market players digested Fed’s February minutes and remarks from Treasury Secretary Steven Mnuchin who expects a tax reform by August.
On the Comex division of the New York Mercantile Exchange, gold for April delivery soared 0.19 percent to trade at $1253.80 an ounce as of 07:05 GMT.
"We want to get this done by the August recess. We've been working closely with the leadership in the House and the Senate and we're looking at a combined plan," Mnuchin said during his first TV appearance at CNBC.
Meanwhile, FOMC minutes came in dovish-than-expected, which plunged expectations for a March interest rate hike and pushed the yellow metal to a 15-week peak over $1250 an ounce.
Bullion was also supported by a falling US dollar, also affected by the minutes. Before the release, chances for a March hike were standing nearly 18 percent, according to CME Group’s FedWatch tool. It seems that some FOMC members decided to wait for further economic details of the Trump administration before making any move that would hit economic growth.
Gold is a dollar-denominated commodity, which makes it vulnerable to changes in US interest rates. Higher rates translate into less demand for non-yielding assets such as bullion.
In economic news, the US Labor Department reported a build of initial jobless claims by 6,000 last week to a total of 244,000. The movement was above expectations for a 2,000 increase.
Oil prices oscillated between small gains and losses in early trading on Friday as US inventories grew on a slower-than-expected pace while news of crude barrels being sold out of storage in Southeast Asia weighed on prices.
US West Texas Intermediate oil futures traded at $54.36 a barrel on the New York Mercantile Exchange, down 0.17 percent from its previous settlement. The London-based Brent crude oil futures fell 0.12 percent to trade at $56.51 a barrel as of 07:05 GMT.
US stockpiles added 564,000 barrels in the week ended February 17, according to the latest Energy Information Administration (EIA) report. Figures came in really short from expectations of a 3.5-million-barrel build, although it marked a seventh consecutive increase in stockpiles.
A day earlier, the American Petroleum Institute (API) said that inventories had felt by 884,000 barrels last week to 512.7 million barrels.
The Organization of the Petroleum Exporting Countries and independent producers such as Russia are currently cutting their output levels as part of a massive plan to rebalance supply in oil markets. Together, OPEC and non-OPEC members are trying to shred 1.8 million barrels per day from global production in the first six months of 2017.
As a response to the OPEC-led action, external producers such as the United States have reacted by raising shale oil production to levels not seen in years. However, analysts point that inventories will have to fall eventually because it’s simply unsustainable.
News agency Reuters reported that tankers anchored off Malaysia, Singapore and Indonesia have been selling nearly 12 million barrels of crude in the last month.
Today, market players will keep an eye on Baker Hughes oil rig count at 18:00 GMT.
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