What’s next? – GOLD, OIL 22.06.17

GOLD

Gold futures were up in early trading hours on Thursday, as market participants looked ahead of further comments from FOMC speakers regarding the future of monetary policy.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were trading up by 0.70 percent at $1254.50 a troy ounce as of 07:15 GMT.

On Wednesday, the yellow metal settled in red territory, advancing 0.24 percent or $2.98 to close around $1,246.49 an ounce.

Bullion was supported by a weakening dollar, which came under pressure despite upbeat economic data in the United States, but gains were limited by rising expectations on a rate hike.

Existing home sales for May came in at 5.62 million units, above expectations for a 5.55 million units. The monthly change was a positive 1.1 percent, against a 0.5 percent decline seen.

Earlier this week, Boston Fed President Eric Rosengren said it would be wise for the US regulator to avoid new interest rate hikes until the end of the year. On the contrary, New York Fed President warned that keeping rates low for too long would have serious effects on the economy.

A rising interest rate environment has negative connotations for the precious metal. First, because the metal is denominated in US dollar, which tend to strengthen with rate hikes. And second, due to the fact that investors move to more attractive, yielding assets.

OIL

Oil prices were down in Asian hours on Thursday, with increasing doubts on the effectiveness of OPEC-led output cuts weighing on market sentiment.

The US benchmark West Texas Intermediate oil futures traded at $42.40 a barrel, down 0.31 percent from its prior close. Meanwhile, the London-based Brent crude oil futures fell 0.33 percent to trade at $44.67 a barrel as of 07:15 GMT.

Crude benchmarks settled in red territory on Wednesday, remaining close to seven-month lows despite a larger-than-expected decline in crude inventories.

The West Texas Intermediate crude contracts for August delivery were down by 2.25 percent at $42.53 a barrel, while the Brent notched down by 2.35 percent to $44.94 a barrel.

The US Energy Energy Information Administration said crude inventories declined by 2.45 million barrels in the week ended June 16, against an estimated reduction of 2.1 million barrels.

The report also showed gasoline supplies falling by 578,000 barrels, while market analysts initially forecasted an increase of 443,000 barrels. Distillate products edged up by 1.1 million barrels, above expectations for a 465,000 barrels build.

Crude prices have been under pressure since OPEC and non-OPEC producers decided to extend output cuts last month until March 2018.

Ahead this week, investors will be looking at the latest oil rig count from Baker Hughes.

Fort Financial Services