Tuesday, 27 June 2017
What’s next? – GOLD, OIL 27.06.17
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what’s next
GOLD
Gold prices were higher in Asian trade on Tuesday, as downbeat data in the United States reduced expectations for a Fed rate hike later this year.
Investors are now focused on upcoming speeches from central bank leaders, especially Fed Chairwoman Janet Yellen in search for hints on the timing of the next rate move. She is likely to comment on current economic conditions rather than monetary policy issues.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were trading up by 0.40 percent at $1,251.40 a troy ounce as of 07:00 GMT.
The yellow metal traded near six-week lows in the previous session. At the current stage, bullion prices are mainly driven by expectations on the monetary normalization process.
In economic news, the Commerce Department reported on Monday a draw of 1.1 percent in durable goods for May. Analysts had estimated a 0.6 percent drop.
While the Federal Reserve insisted in its last encounter that a third rate hike is still pending this year, market analysts are concerned that economic data won’t support the case.
Labor market continues to show strong numbers, but inflation is evidently falling short from expectations, which could implicate serious consequences if combined with a tighter policy.
Gold is sensitive to Fed rate moves as they lift the opportunity cost of holding non-yielding assets, while boosting demand for the US dollar, in which the metal is denominated.
OIL
Oil prices continued to recover in early trading hours on Tuesday, as market players looked ahead of higher upside risks considering benchmarks have been lately driven by speculation.
The US benchmark West Texas Intermediate oil futures traded at $43.67 a barrel, up 0.67 percent from its prior close. Meanwhile, the London-based Brent crude oil futures rose 0.74 percent to trade at $46.17 a barrel as of 07:00 GMT.
Benchmarks are (so far) heading for a positive week, breaking a five-week losing streak. However, market sentiment remains under heavy pressure as traders doubt OPEC-led output cuts would be able counteract an ongoing supply overhang.
Last month, the Organization of the Petroleum Exporting Countries (OPEC) and other independent producers agreed to extend production cuts of 1.8 million barrels per day for a nine-month period until March 2018. The decision didn’t make an impact on crude prices.
Some countries, like Nigeria and Libya were exempted from the deal, while Iran was allowed to maintain current production levels without reducing output.
Meanwhile, US shale producers have added 11 new rigs last week, moving the total count to 758 units, marking the 23rd consecutive week of additions to the highest point in three years.
Ahead in the session, the American Petroleum Institute will release this afternoon its weekly crude and refined products inventories. Tomorrow, official data will be out as of 14:30 GMT.
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