Wednesday, 5 July 2017
What’s next? – GOLD, OIL 05.07.17
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what’s next
GOLD
Gold futures were higher in Asian hours on Wednesday, with increased geopolitical tension in the Korean peninsula boosting demand for safe-haven assets.
On the Comex division of the New York Mercantile Exchange, gold futures were up by 0.55 percent to trade at $1,225.90 a troy ounce as of 05:00 GMT.
On Tuesday, North Korea launched an unidentified ballistic missile that could have landed in Japan’s Exclusive Economic Zone after flying over 900 kilometers.
The United States called for an urgent meeting of the United Nation’s Security Council to discuss further actions against the Pyongyang.
The yellow metal settled nearly 1.76 percent lower on Monday to trade at $1,220.47 as Treasury bond yields moved upwards following an upbeat manufacturing report earlier in the day.
The Institute for Supply Management said its manufacturing PMI index for June came in at 57.8, comfortably above an initially estimated 55.2 and a previous 54.9.
Investors are looking ahead of further economic reports in search for arguments that support a new Federal Reserve interest rate hike later in the year.
According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 50.3 percent probability of a rate move in December.
A raising interest rate environment increases demand for risky assets and lifts the opportunity cost of holding non-yielding assets such as gold.
The metal also came under pressure in the light of a strengthening US dollar. A stronger greenback makes bullion more expensive for investors holding foreign currencies.
Factory orders will be published at 14:00 GMT and Fed’s June meeting minutes at 18:00 GMT.
OIL
Oil prices were lower in early trading hours on Wednesday, with investors awaiting fresh inventories from the American Petroleum Institute later in the session.
Crude benchmarks stabilized on Tuesday as American stock markets were closed due to Independence Day celebrations. For that reason, the release of stockpiles stats was delayed.
The US West Texas Intermediate oil futures traded at $46.99 a barrel, down 0.17 percent from its prior close. Meanwhile, the London-based Brent crude oil futures eased 0.12 percent to trade at $49.55 a barrel as of 05:00 GMT.
On Monday, crude benchmarks continued to recover, extending gains for an eighth consecutive session, adding more than two percent during the session.
According to market analysts, quotes are moving almost entirely on sentiment. Investors are weighing the effects of OPEC-led output cuts to reduce the ongoing supply overhang.
Earlier this year, OPEC and non-OPEC countries agreed to extend production cuts for a nine-month period until March 2018, but opted to keep reduction levels at 1.8 million barrels per day. Traders were disappointed with the agreement terms and quotes didn’t react on it.
Last week, the Energy Department said US production fell by 100,000 barrels per day in the week ended June 23, which boosted oil prices immediately.
Benchmarks were also supported by the latest Baker Hughes oil rig count. The report showed that US drillers reduced by two the number of platforms operating in the country, marking the first fall after 23th straight weeks of growth in drilling activity.
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