What’s next? – GOLD, OIL 07.06.17

GOLD

Gold futures were lower in early trading on Wednesday after reaching seven-week highs as investors moved into safe havens ahead of high-impact events in the second part of the week.

On the Comex division of the New York Mercantile Exchange, gold for June delivery was trading 0.31 percent lower at $1293.50 a troy ounce as of 04:55 GMT.

Not only the precious metal benefit from risk aversion. Safe currencies such as the euro and the yen are also on the buying ticket.

Gold displayed its longest winning streak in seven years last month, adding a 0.05 percent on monthly basis, despite expectations for a Fed rate hike later this month.

According to the CME Group’s Fed rate monitor tool, over 95 percent of market players are expecting the US regulator to raise interest rates at the June 13-14 policy meeting in 25 basis points to a range between 1.00 - 1.25 percent.

The yellow metal, a dollar-denominated asset, is widely affected by changes in US interest rates, which lift the opportunity cost of holding non-yielding assets such as gold.

On Thursday, traders will be paying attention to former FBI director James Comey, who is due to testify on the Trump-Russia investigation before the Senate Intelligence Committee.

Early parliamentary elections in the United Kingdom are also scheduled on Thursday. So far, Theresa May’s Conservative Party is not seen taking a full majority, according to a recent YouGov poll. In the meantime, the European Central Bank will gather for a new policy meeting.

OIL

Oil futures paired gains in early Asian trading on Wednesday after an industry report said crude inventories dropped more than expected last week, while traders continued to focus on rising geopolitical tensions between Qatar and key Arab countries.

The US West Texas Intermediate oil futures traded at $48.13 a barrel on the New York Mercantile Exchange, down 0.12 percent from its prior close. The international Brent crude oil futures eased 0.10 percent to trade at $50.07 a barrel as of 04:55 GMT.

The American Petroleum Institute said crude oil reserves fell by 4.620 million barrels in the week ended June 2, exceeding expectations for a 3.5 million-barrel reduction.

However, gasoline stockpiles rose by 4.1 million barrels against an expected build of 667,000 barrels. Distillate products added 1.8 million barrels vs a forecasted increase of 271,000.

These figures came in ahead of the release of the official stats from the US Energy Information Administration on Wednesday at 14:30 GMT.

Traders are carefully monitoring the developments in the Middle East region, as the list of countries cutting diplomatic and commercial ties with Qatar has increased to nine. The Arab nations have taken this decision over alleged financial aid of Qatar to terrorist groups.

Qatar has now an oil production capacity of 600,000 barrels per day, which makes it a small producer. Nevertheless, it’s a member of Organization of the Petroleum Exporting Countries (OPEC) and the conflict could disrupt the output cuts agreement.

Fort Financial Services