What’s next? – GOLD, OIL 13.06.17

GOLD

Gold prices were little changed in Asian trade on Tuesday, with investors focusing on the first day of the Federal Reserve’s June policy meeting.

On the Comex division of the New York Mercantile Exchange, gold for June delivery was trading down by 0.07 percent at $1268.00 a troy ounce as of 06:10 GMT.

Overnight, the yellow metal settled near breakeven, as market participants continued to prepare for the interest rate decision of the Federal Open Market Committee on Wednesday, along with a press conference of the Fed Chairwoman Janet Yellen.

The US central bank is expected to raise interest rates for the second time this year in 25 basis points to a range between 1.00 - 1.25 percent. According to CME Group’s FedWatch program, traders are currently pricing in more than a 95 percent chance of a rate hike this month.

Recent downbeat data in the United States as well as Washington’s political turmoil have increased concerns over the Fed monetary normalization process. Some analysts said the Fed could reduce the number of expected interest rate hikes in 2017 from three to two moves.

Two weeks ago, the Labor Department reported a weaker-than-expected jobs build in May, which came in as a cold ice basket on investors head. On Wednesday, attention will be directed to the latest reading of the consumer price index, which is a key indicator for the Fed.

Gold, a dollar-denominated commodity, is sensitive to US interest rates hikes, which increase demand for risky assets and put under pressure safe-havens such as the precious metal.

OIL

Oil futures moved higher in Asian hours on Tuesday, with investors focusing on industry reports from OPEC and the International Energy Agency, while keeping an eye on fresh inventory data.

The US benchmark West Texas Intermediate oil futures traded at $46.24 a barrel, up 0.35 percent from its prior close. Meanwhile, the London-based Brent crude oil futures soared 0.35 percent to trade at $48.46 a barrel as of 06:40 GMT.

The Organization of Petroleum Exporting Countries is set to release its monthly report this afternoon, while the International Energy Agency will be presenting its own on Wednesday. Data from the oil cartel will be on the watch as traders continue to assess the effect of extended OPEC-led output cut agreement. Previously, the group reported high compliance with the cuts.

According to analysts, OPEC has complied 111 percent with the production cut plan signed in 2016 and which its first phase expires this month. The organization, in collaboration with external producers such as Russia, extended the deal until March 2018.

While output cuts are seen as a positive factor for oil prices, the group opted to keep cut level target steady at 1.8 million barrels and that was not taking with a smile by market players.

Crude futures settled higher on Monday following an attempt by Saudi Arabia and Russia to calm down investor concerns over the ongoing supply glut, assuring the speed of stockpiles reductions will increase in the near term.

Later this evening, the American Petroleum Institute will present its weekly report on crude and refined product stockpiles for the week ended June 9.

Fort Financial Services