What’s next? – GOLD, OIL 16.06.17

GOLD

Gold futures were slightly lower in Asian hours on Friday as the Federal Reserve interest rate hike continued to support the US dollar, although gains were capped by an ongoing investigation into President Donald Trump for possible obstruction of justice.

On the Comex division of the New York Mercantile Exchange, gold for June delivery was trading up by 0.09 percent at $1255.70 a troy ounce as of 07:35 GMT.

The yellow metal settled in red territory on Thursday, hovering around three-week lows amid a recovering greenback and as traders returned to a risk-on mode in stock markets.

The Federal Reserve not only rose interest rates for the second time this year, but said a third hike is still on the watch if economic conditions supported the case. Fed Chair Janet Yellen also said the regulator will “relatively soon” begin its plan to unwind the $4.5 trillion balance sheet.

In economic news, initial jobless claims fell by 5,000 to 237,000 in the week ended June 4, compared to expectations for a 3,000 reduction. Manufacturing activity in the states of New York and Philadelphia came in at 19.8 and 27.6 respectively.

Gold, a dollar-denominated commodity, is sensitive to interest rate hikes in the US. Higher interest rate environments make the precious metal more expensive for investors holding foreign currency, while boosting demand for risky assets and the greenback.

OIL

Oil futures edged higher in Friday early trading, with market participants looking ahead of a weekly rig count from Baker Hughes later in the session.

The US benchmark West Texas Intermediate oil futures traded at $44.86 a barrel, up 0.90 percent from its prior close. Meanwhile, the London-based Brent crude oil futures soared 0.55 percent to trade at $47.18 a barrel as of 07:35 GMT.

Last week, Baker Hughes said US drillers added 8 platforms, marking a 21-week winning streak and leaving the total count at 741 units, the highest point since mid-2015.

Crude prices were lower on Thursday as concerns that OPEC-led output cuts wouldn’t be able to counteract the increasing crude overhang weighed on investor sentiment.

Adding to the downtrend, the US Energy Information Administration reported a smaller-than-expected decline in crude inventories for the week ended June 9.

Data also showed that gasoline supplies unexpectedly rose by 2 million barrels against an initially forecasted 457,000 barrels build, despite the start of the summer driving season.

Figures didn’t contribute to improve market sentiment, which was already under pressure after the International Energy Agency (IEA) said non-OPEC production was expected to rise soon.

"For total non-OPEC production, we expect production to grow by 700,000 bpd this year, but our first outlook for 2018 makes sobering reading for those producers looking to restrain supply," wrote the IEA earlier this week.

Baker Hughes will release its latest rig count as of 17:00 GMT.

Fort Financial Services