Tuesday, 7 March 2017
What’s next? – GOLD, OIL 08.03.17
Gold futures were higher in Asian hours on Wednesday as investors looked ahead of the latest Chinese trade balance figures.
On the Comex division of the New York Mercantile Exchange, gold for April delivery was down 0.08 percent to trade at $1217.10 a troy ounce as of 07:00 GMT.
China’s trade balance moved to CNY -60.40 billion in February against CNY 172.5 bn expected by analysts and a previous CNY 354.5 billion. Exports* came in much lower-than-expected at 4.2 percent from a previous 15.9 percent. Imports* jumped by a surprising 44.7 percent, almost doubling the forecast and a prior increase of 25.2 percent.
Overnight, the yellow metal dropped to a multi-week low, as the dollar extended gains over speculation that the Federal Open Market Committee will hike rates at the next March meeting.
According to fed funds tracked by the CME Group’s FedWatch program, odds for a March rate hike are currently standing at nearly 90 percent, almost 10 percent more than on Monday.
Expectations for a rate move are fueled by a series of hawkish remarks from Fed Chair Janet Yellen and other FOMC officials, together with upbeat economic reports.
Higher interest rates push the precious metal to the downside as it becomes more expensive for investors holding foreign currencies and traders tend to move into high-yielding assets.
The US Commerce Department said the trade deficit deepened to $48.5 billion in January, widening the gap by 9.6 percent to the highest point since 2012.
Today, ADP will release its February reading on nonfarm employment change, which comes two days before official data is presented by the Bureau of Labor Statistics. Both reports could have significant impact on the Fed rate decision and therefore, in gold prices too.
* Percentages displayed according to figures in CNY.
Oil prices eased in Asian hours on Wednesday following an industry report that anticipated a ninth consecutive build in US crude inventories, fueling concerns that US shale production could derail OPEC-led efforts to rebalance supply levels.
US West Texas Intermediate oil futures traded at $52.78 a barrel on the New York Mercantile Exchange, down 0.68 percent from its prior close. The London-based Brent crude oil futures fell 0.59 percent to trade at $55.59 a barrel as of 07:00 GMT.
At this stage, crude oil prices continue to trade in a tight range. Analysts have pointed out that the current interval is defined by strategies from the oil cartel and US producers.
If prices were to move below the $50 mark, OPEC countries would cut more. On the contrary, if the quotes were to move above $55, American producers will pump more barrels.
On Tuesday, the American Petroleum Institute reported a 11.6-million-barrel build in crude stockpiles, which stands at more than five times above market expectations.
Official data from the US Energy Information Administration will be released at 15:00 GMT later in the day and in case it confirms API data, prices could come under considerable pressure and show some short to medium term correction.
Oil prices are also affected by a strong dollar ahead of the Federal Reserve March meeting, as nearly 90 percent of market players believe the regulator will hike rates.
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