Wednesday, 2 August 2017

What’s next? – GOLD, OIL 02.08.17

Posted by Valentine at 10:10 Labels:

GOLD

Gold prices corrected to the downside in Asian trade on Wednesday as the US dollar began to recover some of its previous losses in anticipation of July’s employment report.

On the Comex division of the New York Mercantile Exchange, gold futures were down by 0.65 percent to trade at $1,271.10 a troy ounce as of 05:00 GMT.

The yellow metal settled in green territory on Tuesday, supported by a weaker US dollar as economic reports presented a mixed scenario in terms of inflation and economic activity.

The core PCE price index came in at 1.5 percent in June, above an initially estimated 1.3 percent advance. Personal spending was aligned with analysts expectations of 0.1 percent.

Analysts pointed out that personal spending was unable to rise for the first time in seven months, which could be suggesting a weaker consumption in the current quarter.

In a separate report, the Institute for Supply Management said its manufacturing PMI index for July notched down to 56.3 from a previous reading of 57.8.

By the end of the session, gold futures for August delivery were trading around $1,272.410 a troy ounce, adding 0.46 percent and hitting a seven-week peak.

These results did not contribute to boost speculation for a Federal Reserve interest rate hike by December, which according to the CME Group’s FedWatch tool currently stand at 42.5 percent.

Gold is sensitive to interest rate moves in the United States. A rising rates environment increases demand for US dollars and weighs on safe-haven assets such as the precious metal.

The metal is also supported by the ongoing political turmoil in Washington as the Trump administration continues to change faces in its cabinet while the Russia case is still ongoing.

OIL

Oil prices edged down in Asian hours on Wednesday as an industry report said crude stockpiles rose last week, while traders awaited official data later in the session.

The US West Texas Intermediate crude futures traded 0.96 percent lower at $48.69 per barrel as of 05:00 GMT, while the London-based Brent contracts on the ICE Futures Exchange in London were down 0.93 percent to $51.30 a barrel.

The American Petroleum Institute said crude oil supplies increased by 1.78 million barrels in the week ended July 28. Analysts had forecasted a 2.9 million barrels reduction following a previous week decline of nearly 10.23 million barrels.

Data also showed gasoline reserves falling 4.8 million barrels, adding to a prior 1.9 million barrels decrease seen the prior week. Distillate products notched down by 1.22 million barrels.

The US Energy Information Administration is due to release its weekly report on crude and refined products stockpiles as of 14:30 GMT on Wednesday, with economists pointing at a 2.9 million barrels reduction. API and EIA data are not always correlated.

Market players are also keeping a moderate positioning in the light of an upcoming meeting of OPEC leaders next week in Abu Dhabi to discuss a potential expansion of output cut volumes.

The Organization of the Petroleum Exporting Countries and independent producers led by Russia agreed earlier this year to extend production cuts of 1.8 million barrels for a nine-month period until March 2018. However, oil prices haven’t been reacting positively to the deal.

There are still serious doubts that these measures will be able to curb the ongoing supply overhang and push prices to the upside in the short term. Especially as Reuters said OPEC continues to increase its production despite the output agreement.

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