Thursday, 3 August 2017
What’s next? – GOLD 03.08.17
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what’s next
GOLD
Gold futures edged lower in Asian hours on Thursday as the dollar continued to recover ahead of the release of nonfarm payrolls at the end of this week.
On the Comex division of the New York Mercantile Exchange, gold futures were down by 0.81 percent to trade at $1,268.00 a troy ounce as of 07:05 GMT.
The yellow metal retreated on Wednesday but hold near a seven-week peak as ADP employment change fell short from expectations, putting the American currency under pressure.
Gold is a dollar-denominated commodity and therefore, a weaker greenback makes it more attractive and cheaper for investors holding foreign currencies.
According to the latest ADP report, the US private sector added 178,000 jobs in July, below a forecasted jobs build of 185,000. Now focus has turned into the official NFP report on Friday.
Market players will closely monitor jobs data tomorrow as it is a key metric for the Federal Reserve and the future of monetary policy. In numerous occasions, Fed Chairwoman Janet Yellen said inflation and labor market conditions should back any interest rate adjustment.
Fed funds tracked by CME Group’s FedWatch tool show chances for a 25 basis points interest rate hike by December standing at 42.5 percent. The precious metal is sensitive rate moves in the United States as a growing rates environment weighs on safe-haven assets.
Ahead in the day, attention will be directed to a batch of economic reports, including initial jobless claims, factory orders for June and the ISM non-manufacturing PMI for July.
OIL
Oil futures were lower in Asian trade on Thursday, with investors awaiting Baker Hughes oil rig count and OPEC compliance with the output reduction deal.
The US West Texas Intermediate crude futures traded 0.50 percent lower at $49.34 per barrel as of 07:05 GMT, while the London-based Brent contracts on the ICE Futures Exchange in London were down 0.52 percent to $52.09 a barrel.
On Wednesday, crude prices settled higher following an upbeat stockpiles report from the US Energy Information Administration. The agency said crude reserves declined for a fifth consecutive week, although slightly below market expectations.
According to data, crude inventories fell by 1.5 million barrels in the week ended July 28, while analysts had predicted a 2.9 million barrels reduction.
As for gasoline supplies, one of today’s most relevant refined products, the drop was near 2.5 million barrels, which came in comfortably above an expected draw of 636,000 barrels. Distillate products notched down by 150,000 barrels against an initially estimated drop of 525,000 barrels.
These news provided strong support to both oil benchmarks and allowed them to recover from a prior session two-percent loss in the light of API’s report.
The American Petroleum Institute (API) said crude oil supplies rose by 1.78 million barrels last week. This non-official report also showed gasoline reserves falling 4.8 million barrels and distillate products down by 1.22 million barrels.
Skepticism over OPEC’s ability to rebalance the oil market by pushing down production seems to be reawakening among key investors. Markets are worried about compliance with the output cut agreement signed back in May and that’s meant to continue until March 2018.
Market participants are now waiting for the Organization of the Petroleum Exporting Countries to gather next week for an extraordinary meeting in Abu Dhabi to discuss the output deal.
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