What’s next? – GOLD, OIL 18.05.17

GOLD
Gold futures moved higher in Asian hours on Thursday, as market participants migrated to safe-haven assets in reaction to increasing concerns over the Trump administration and weaker-than-expected economic reports from the US economy.
On the Comex division of the New York Mercantile Exchange, gold for June delivery added 0.14 percent to trade at $1260.40 a troy ounce as of 01:45 GMT.
As political uncertainty continued to weigh on market sentiment and pressure equities, traders decided to leave aside risky assets for the time being. Reports exposed President Donald Trump asking former FBI Director James Comey to suspend an investigation on his then-National Security Advisor Mike Flynn.
Investors fear that political tension between and inside his own party will derail plans for the tax reform, deregulation and higher infrastructure spending, which have been key market drivers since the November presidential election in 2016.
The political sphere also had effects on the dollar value. The US Dollar Index, which gauges the greenback against a basket of six major currencies, reached a six-month lows at 97.43, losing 0.63 percent during the session.
The yellow metal is denominated in US dollars, making it very sensitive to currency moves. In this scenario, bullion prices surged as it becomes less expensive for foreign investors.
Meanwhile, expectations for a Federal Reserve interest rate hike at the June monetary policy meeting continued to decline in light of the context. According to Fed funds tracked by CME Group’s FedWatch tool, traders are pricing a 69.2% chance of an interest rate move next month.

OIL 
Oil benchmarks edged down in early trading on Thursday, following a substantial rise in light of a new drop in US crude inventories, marking a sixth-consecutive weekly drawdown.
US West Texas Intermediate oil futures traded at $48.89 a barrel on the New York Mercantile Exchange, down 0.37 percent from its prior close. The international Brent crude oil futures eased 0.34 percent to trade at $52.03 a barrel as of 01:45 GMT.
According to the latest report from the US Energy Information Administration, crude oil stockpiles fell by 1.75 million barrels in the week ended May 12, against expectations for a 2.4 million barrels reduction. Although data was below forecast, it confirmed a negative trend.
Taking a look at refined products, gasoline reserves notched down in 413.000 barrels, compared to an projected draw of 731.000 barrels. Distillate products dropped by 1.94 million barrels, above expectations for a 1 million barrels decrease.
Meanwhile, investors continued to look ahead of the next OPEC meeting in Vienna. On May 25, the oil cartel is set to decide whether to extend the output cuts agreement or not.
However, it seems more and more countries are coming around in support to the deal. Kuwait, Iraq, Venezuela, Oman, Saudi Arabia have all expressed their pro-extension opinions.
Earlier this week, even Russian President Vladimir Putin said the output cuts were the right way to go in order to stabilize oil prices and improve market conditions worldwide.

Fort Financial Services