What’s next? – GOLD, OIL 02.06.17

GOLD

Gold futures edged lower in Asian hours on Friday as the yuan rose to a seven-month peak, a factor that could promote demand of the yellow metal amid Chinese investors.

On the Comex division of the New York Mercantile Exchange, gold for June delivery was trading 0.55 percent lower at $1263.10 a troy ounce as of 07:15 GMT.

Traders are currently focused on the release of labor market data on Friday, including nonfarm payrolls and the unemployment rate for May. Analysts are forecasting a 185,000 jobs build.

Data is expected to have a strong impact on expectations for a rate hike later this month. According to Fed funds tracked by CME Group’s FedWatch tool, chances for a June rate move are standing above 91 percent. The regulator is set to increase rates by 25 basis points from 0.75 - 1.00 percent to 1.00 - 1.25 percent.

Earlier this week, ADP said the US private sector added 253,000 jobs in May, which was above expectations for a 185,000 jobs addition. Economic news also included the US manufacturing PMI, which moved higher to 53.5 from an expected 52.8 points.

Upbeat data supported the US dollar, which gradually corrected upwards. A stronger greenback puts the precious metal under pressure as it becomes more expensive for investors holding foreign currencies, while increasing demand for risky assets.

OIL

Crude oil futures dropped in Asian trade on Friday following President Donald Trump’s decision to abandon the 2015 Paris climate change agreement, while market players remained cautious ahead of a new oil rig count in the United States.

The US West Texas Intermediate oil futures traded at $47.64 a barrel on the New York Mercantile Exchange, up 1.49 percent from its prior close. The international Brent crude oil futures dropped 1.40 percent to trade at $59.92 a barrel as of 07:15 GMT.

Oilfield service provider Baker Hughes is due to release its weekly US oil rig count at 17:00 GMT. Last week, the organization reported a 19th consecutive build that left the total count at 722 units, the highest point since April 2015.

Oil benchmarks settled in green territory on Thursday after the US Energy Information Administration reported a wider-than-expected drop in crude inventories in the week ended May 26, marking an 8th straight weekly decline.

According to the agency, crude stockpiles fell by 6.4 million barrels last week, compared to expectations for a 2.5 million barrels drawdown. Gasoline inventories reduced by 2.86 million barrels against an expected draw of 1.1 million barrels. Distillate products increased by 394 thousand barrels, although market analysts had predicted a 755 thousand barrels drop.

It’s not a surprise for investors that gasoline stocks have notched down as the United States officially inaugurated its summer driving season, which pushed demand for fuel.

Crude prices came under pressure last week as OPEC and its allies agreed to extend output cuts for a nine-month period until March 2018, but haven’t increased the volume of reductions.

Fort Financial Services