Monday, 28 August 2017

What’s next? – GOLD, OIL 28.08.17

Posted by Valentine at 13:29 Labels:

GOLD

Gold prices broke above the $1,300 psychological level in Asian hours on Monday, as Federal Reserve Chairwoman Janet Yellen avoided monetary policy comments during her speech at the Jackson Hole symposium, pushing the US dollar to the downside.

The dollar index, which gauges the greenback against six major rivals, was down 0.27 percent in early trading at 92.43, adding to previous session's losses.

Yellen opted to focus her speech on financial stability, offering no hints over monetary policy issues, which of course weighed on expectations for a third rate hike later this year.

Part of the speech referred to President Donald Trump’s intention to ease regulation in the financial industry. Yellen said reforms applied following the 2008 crisis have strengthened the financial system and are not limiting economic growth by any means.

Dollar-denominated gold benefits from a weaker greenback as it becomes more attractive for investors holding foreign currencies. Bullion prices rose about 0.5 percent last week.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.38 percent or $4.90 up at $1,302.80 a troy ounce as of 07:50 GMT.

The yellow metal also found support on Monday as tensions in the Korean peninsula spiked once again following the launch of three ballistic missiles by Pyongyang on Saturday.

According to Fed funds tracked by CME Group’s FedWatch program, investors are pricing in a nearly 36.3 percent chance of a 25 basis points rate move by December.

Ahead this week, investors will be paying attention to fresh labor market report and a revised version of second-quarter US gross domestic product. Activity indexes in the manufacturing and services sectors will also be in focus, as well as personal consumption data.

OIL

Oil futures moved lower in early trading hours on Monday as a massive shut down of US Gulf Coast refineries in the wake of hurricane Harvey could reduce demand for American crude.

The US West Texas Intermediate crude futures traded 0.98 percent higher at $47.40 per barrel as of 08:10 GMT, while the London-based Brent contracts on the ICE Futures Exchange in London were up 0.08 percent to $52.37 a barrel.

According to the US Department of the Interior’s Bureau of Safety and Environmental Enforcement, the hurricane has taken offline about 22 percent of oil output from the Gulf of Mexico and nearly 26 percent of natural gas production.

Hurricane Harvey is affecting the heart of America’s oil production. Several refineries were forced to shut down operations in the region until weather conditions improve.

Exxon Mobil said its Baytown refinery, the second largest refinery in the country, with an output capacity of 560,000 barrels per day was shut down due to heavy flooding.

Royal Dutch Shell also closed its Deer Park refinery and chemical plant, which produces about 325,000 barrels per day. Petrobras suspended works at the Pasadena plant, as well as Phillips 66 did with its 247,000 barrels per day Sweeny refinery.

The situation in Houston, one of Texas largest metropolis, is critical. Emergency services said nearly 6,000 requests for rescues were received in the last 72 hours as flooding expanded.

Last week, oil prices settled in green territory as oilfield services provider Baker Hughes reported a second consecutive weekly decline in its rig count. Total count stands at 759 units.

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