Thursday, 25 May 2017
What’s next? – GOLD, OIL 25.05.17
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what’s next
Gold futures moved higher in European hours on Thursday, reaching three week highs as the US dollar eased after the Federal Reserve minutes anticipated further rate hikes and the reduction of its massive $4.5 balance sheet later this year.
On the Comex division of the New York Mercantile Exchange, gold for June delivery was up 0.34 percent to trade at $1257.40 a troy ounce as of 07:15 GMT.
Minutes from the Fed's last policy meeting showed policymakers agreed they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary, though most said a hike was coming soon.
According to the minutes, members of the Federal Open Market Committee discussed steps to progressively scale down its huge bond holdings. Fed officials agreed to set monthly caps to limit the amount of bonds available for sale.
Analysts have pointed out that reducing the balance sheet ultimately means rising borrowing costs for the economy. According to CME Group’s FedWatch program, traders are expecting the regulator to hike interest rates in June.
The dollar index, which gauges the greenback against a basket of six major currencies, was 0.22 percent higher to trade at 96.93 earlier this morning.
The yellow metal, a dollar-denominated commodity, is sensitive to interest rate moves, as they raise the opportunity cost of holding non-yielding assets such as gold.
OIL
On the Comex division of the New York Mercantile Exchange, gold for June delivery was up 0.34 percent to trade at $1257.40 a troy ounce as of 07:15 GMT.
Minutes from the Fed's last policy meeting showed policymakers agreed they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary, though most said a hike was coming soon.
According to the minutes, members of the Federal Open Market Committee discussed steps to progressively scale down its huge bond holdings. Fed officials agreed to set monthly caps to limit the amount of bonds available for sale.
Analysts have pointed out that reducing the balance sheet ultimately means rising borrowing costs for the economy. According to CME Group’s FedWatch program, traders are expecting the regulator to hike interest rates in June.
The dollar index, which gauges the greenback against a basket of six major currencies, was 0.22 percent higher to trade at 96.93 earlier this morning.
The yellow metal, a dollar-denominated commodity, is sensitive to interest rate moves, as they raise the opportunity cost of holding non-yielding assets such as gold.
OIL
Oil prices turned higher in anticipation of an OPEC meeting on Thursday. During the event, oil cartel officials are expected to vote on the extension of output cuts into 2018.
The US West Texas Intermediate oil futures traded at $51.74 a barrel on the New York Mercantile Exchange, up 0.74 percent from its prior close. The international Brent crude oil futures rose 0.80 percent to trade at $54.39 a barrel as of 07:30 GMT.
Prices have been increasing as the Organization of the Petroleum Exporting Countries (OPEC) showed consensus with independent producers, such as Russia, to extend the reduction of 1.8 million barrels per day (bpd) until March 2018, adding an extra nine-month period to the initial six months agreed in November 2016. Some analysts even pointed at a 12-month extension.
The cuts are actually set to stay in place, at 1.8 million barrels per day, but a deeper, more aggressive reduction could be discussed during the gathering in Vienna later in the day.
Several industry consultants said extending the deal, despite an initial spike, would have little effect on the price forecast for this year, which is now standing at an average $55 for Brent.
Also, analysts believed that extending the pact for nine months would result in growing US shale production by 950 thousand barrels per day. From mid-2016, production in the United States has added more than 10 percent in order to take advantage of OPEC’s falling market share.
Yesterday, the US Energy Information Administration said crude inventories dropped 4.4 million barrels in the week ended May 19, above a forecasted reduction of 2.4 million barrels.
The US West Texas Intermediate oil futures traded at $51.74 a barrel on the New York Mercantile Exchange, up 0.74 percent from its prior close. The international Brent crude oil futures rose 0.80 percent to trade at $54.39 a barrel as of 07:30 GMT.
Prices have been increasing as the Organization of the Petroleum Exporting Countries (OPEC) showed consensus with independent producers, such as Russia, to extend the reduction of 1.8 million barrels per day (bpd) until March 2018, adding an extra nine-month period to the initial six months agreed in November 2016. Some analysts even pointed at a 12-month extension.
The cuts are actually set to stay in place, at 1.8 million barrels per day, but a deeper, more aggressive reduction could be discussed during the gathering in Vienna later in the day.
Several industry consultants said extending the deal, despite an initial spike, would have little effect on the price forecast for this year, which is now standing at an average $55 for Brent.
Also, analysts believed that extending the pact for nine months would result in growing US shale production by 950 thousand barrels per day. From mid-2016, production in the United States has added more than 10 percent in order to take advantage of OPEC’s falling market share.
Yesterday, the US Energy Information Administration said crude inventories dropped 4.4 million barrels in the week ended May 19, above a forecasted reduction of 2.4 million barrels.
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