What’s next? – GOLD, OIL 05.05.17

GOLD
Gold prices moved higher on Friday in Asia as market players flew into safe haven assets before the release of US nonfarm payrolls later in the day.
The US Labor Department will release its latest employment report as of 12:30 GMT, with analysts projecting a 185,000 jobs build in April. The unemployment rate is due to tick up to 4.6 percent, while average hourly earnings are expected to grow 0.3 percent.
On the Comex division of the New York Mercantile Exchange, gold for June delivery rose 0.44 percent to trade at $1234.00 a troy ounce as of 07:15 GMT.
Labor market conditions are considered to be one of the most important factors weighing on Federal Reserve interest rate decisions. Therefore, market participants will certainly be looking into these reports as the June policy meeting is now closer than ever.
According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 73.8 percent chance of a rate raise at the next encounter.
Higher interest rates are seen as a negative factor for gold, a dollar-denominated commodity. As the US dollar strengthens, the precious metal falls into pressure.
On Wednesday, the Federal Reserve authorities opted to leave interest rates unchanged in a range between 0.75 percent and 1.00 percent. The regulator used an optimistic tone, saying the recent slowdown of the first-quarter gross domestic product was “transitory”.
Gold traders will be paying attention to speeches from FOMC members Stanley Fischer and Williams at 15:30 GMT and 16:45 GMT respectively. Fed Chairwoman Janet Yellen will also be offering some words as of 17:30 GMT.
Over the weekend, the second round of the French presidential elections will be in focus. So far, polls show centristic Emmanuel Macron as a favourite against far-right Marine Len.

OIL
Oil futures dropped in Asia hours on Friday as traders prepared for the release of nonfarm payrolls in the US, as well as the weekly oil rig count from oilfield services Baker Hughes.
US West Texas Intermediate oil futures traded at $44.21 a barrel on the New York Mercantile Exchange, down 2.88 percent from its prior close. The international Brent crude oil futures fell 2.54 percent to trade at $47.15 a barrel as of 07:15 GMT.
Overnight, reports showed that OPEC and non-OPEC producers are likely to renew their output cuts deal for another six months this year. The agreement is meant to cut 1.8 million barrels per day from global production, reducing global oversupply and prompting up prices.
However, market players are concerned about the response of US shale producers, which have been ramping up their production lately. That’s precisely why the weekly oil rig count is relevant, to determine whether this trend continues or not.
According to the latest Baker Hughes report, US drillers added 9 platforms to 697 units, marking a 15th consecutive weekly increase. This week’s report will be available as of 17:00 GMT.
Earlier this week, the US Energy Information Administration said crude inventories fell in 930,000 barrels for the week ended April 26, compared to expectations for a 2.333 million barrels reduction. Gasoline supplies added 191,000 barrels, while distillate products eased by 562,000 barrels.
OPEC members are expected to meet on May 25 to decide on the extension of the production cuts agreement. Until that time, market sentiment will remain under significant pressure.

Fort Financial Services