Thursday, 13 July 2017

What’s next? – GOLD, OIL 13.07.17

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GOLD

Gold extended gains in Asian hours on Thursday, as a dovish rhetoric from Federal Reserve President Janet Yellen pushed the dollar down, while political concerns still weighed on market sentiment.

On the Comex division of the New York Mercantile Exchange, gold futures were up by 0.25 percent to trade at $1,222.20 a troy ounce as of 04:45 GMT.

Yellen's testimony before Congress took investors by surprise, as she opted for a more moderate approach when talking about future interest rate hikes.

She said the regulator will continue to move forward with the monetary normalization process but without committing to any specific timeline, arguing the inflation outcome remains unclear.

In a rising rate environment, investors feel attracted to high-return assets, rather than safe-havens such as gold. Plus, rate hikes support the US dollar, in which gold is denominated.

The US dollar index, which tracks the greenback against a basket of six major rivals, was down 0.11 percent to 95.41 by the time of this writing.

The yellow metal has been actively recovering this week in the light of renewed speculation over the Trump-Russia ongoing investigation. Donald Trump Jr. released an email chain explaining some of his contacts with Russian top officials.

Unless FOMC speakers provide some extra support to the idea of a third interest rate hike later this year, gold will most likely extend its recovery in the near term. A bullish gold would also be supported by downbeat economic data from the United States.

All attention is now directed to Friday’s consumer price index, a key metric for the Fed.

OIL

Oil prices traded near breakeven in early trading hours on Thursday following a sharp decline in crude inventories that contributed to gains in the previous session.

The US Energy Information Administration reported a 7.6 million barrels drop for the week ended July 7, compared to an initially estimated reduction of 2.850 million barrels. A day earlier, the American Petroleum Institute anticipated an 8.1 million barrel draw.

The US West Texas Intermediate oil futures traded at $45.50 a barrel, up 0.02 percent from its prior close. Meanwhile, the London-based Brent crude oil futures added 0.02 percent to trade at $47.75 a barrel as of 05:05 GMT.

Crude benchmarks began recovering on Tuesday when the Organization of the Petroleum Exporting Countries said Nigeria and Libya might be willing to cap their production levels in the near future, joining the output cut agreement.

In May, OPEC members and a group of independent producers led by Russia agreed to extend the output reduction deal for a nine-month period until March 2018. Earlier this week, the oil cartel said there are chances the agreement will be extended beyond that date.

For today, focus will be directed to the monthly report of the International Energy Agency, scheduled for release in the afternoon. On Friday, Baker Hughes oil rig count will be presented.

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