What’s next? – GOLD, OIL 14.06.17

GOLD

Gold edged up in Asian trading on Wednesday as investors opted for a cautious positioning ahead of the Federal Reserve interest rate decision, while hoping for further details on plans to reduce the regulator’s massive balance sheet later this year.

On the Comex division of the New York Mercantile Exchange, gold for June delivery was trading down by 0.09 percent at $1269.80 a troy ounce as of 07:15 GMT.

Earlier today, China said industrial production increased 6.5 percent in May, which is above analysts’ expectations, as well as retail sales added a 10.7 percent gain. Fixed-asset investment rose 8.6 percent last month, falling short from a forecasted 8.8 percent.

The yellow metal remained near breakeven on Tuesday, with about 96 percent of market players expecting a rate hike this month, but keeping an eye on the press conference of Janet Yellen for information regarding the plan to cut its $4.5 trillion balance sheet.

Higher interest rates push safe-havens to the downside, while promoting demand of the US dollar, in which gold is denominated. Bullion is very sensitive to interest rate moves.

Range trading is likely until the Fed announces its interest rate decision, presents its statement and forecast and Yellen gives an awaited press conference. There has been strong speculation on this meeting due to downbeat economic data and worsening political conditions.

Some analysts believe the Federal Reserve could change its plan to hike 3 times in 2017, leaving the adjustment to only 2 rate increases until the economy shows a better performance.

OIL

Oil futures dropped in Asian hours on Wednesday following a disappointing inventory report from the American Petroleum Institute and as traders looked ahead of official data later today.

The US benchmark West Texas Intermediate oil futures traded at $46.10 a barrel, down 0.77 percent from its prior close. Meanwhile, the London-based Brent crude oil futures eased 0.64 percent to trade at $48.41 a barrel as of 07:15 GMT.

Earlier in the session, China said industrial production increased 6.5 percent in May, which is above analysts’ expectations, as well as retail sales added a 10.7 percent gain. Fixed-asset investment rose 8.6 percent last month, falling short from a forecasted 8.8 percent.

According to data, Chinese crude production notched down by 3.7 percent in May year-over-year to 3.83 million barrels per day, the weakest daily level so far.

On Tuesday, the American Petroleum Institute reported an increase of 2.753 million barrels in crude stockpiles for the week ended June 9. Gasoline supplies rose by 1.794 million barrels against a forecasted fall of 457,000 barrels, while distillates declined by 1.451 barrels compared to a 686,000 barrels increase seen.

Crude futures settled in green territory on Tuesday as investors awaited fresh inventory data with expectations for a draw in crude stockpiles as a result of OPEC-led output cuts.

OPEC’s monthly report did not contribute to a positive sentiment as it showed that the oil cartel increased its total output by 336,000 barrels per day in May to 32.14 million bpd.

The US Energy Information Administration will release its weekly report as of 14:30 GMT.

Fort financial Services