Tuesday, 5 September 2017

What’s next? – GOLD, OIL 05.09.17

Posted by Valentine at 12:25 Labels:

GOLD

Gold futures traded close to their highest level in nearly a year on Tuesday, as geopolitical tensions in the Korean peninsula boosted demand for safe-haven assets.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.64 percent or $8.50 up at $1,338.90 a troy ounce as of 07:50 GMT.

Over the weekend, North Korea conducted its sixth nuclear test, which according to local media has been a total success. The bomb detonated was hydrogen type.

Yesterday, the United Nations Security Council met to discuss the North Korean threat. US Ambassador to the UN Nikki Haley said North Korea is “begging for war”.

Fears of a real attack increased overnight as South Korea’s Defense Ministry said Kim Jong Un is preparing a new launch of an intercontinental ballistic missile.

Gold is one of the most popular safe-haven assets among market participants. The metal usually increases its value in periods of uncertainty and market stress.

The precious metal was also supported by a weaker dollar. The American currency was 0.27 percent against six major rivals to trade at 92.51 by the time of this writing.

Bullion prices are denominated in US dollars. A weaker greenback makes the metal more attractive for investors holding foreign currencies.

US markets were closed on Monday due to the Labor Day holiday. Today, traders will pay close attention to speeches from FOMC members Brainard, Kashkari and Kaplan as of 11:30 GMT, 17:10 GMT and 23:00 GMT respectively.

Market participants are trying to decode Federal Reserve intentions regarding future adjustments to its monetary policy, especially in terms of interest rates.
According to Fed funds tracked by CME Group’s FedWatch program, market participants are currently pricing in a 41 percent probability of a 25 basis points interest rate move by December.

OIL

Oil prices were volatile in early trading hours on Tuesday, with US crude futures moving upwards as demands seems to be recovering, while the international benchmark came under pressure as rising tensions in the Korean peninsula kept investors away from risky assets.

The US West Texas Intermediate crude futures were trading 0.55 percent higher at $47.55 per barrel as of 08:05 GMT, while the London-based Brent contracts were down 0.31 percent to trade at $52.18 per barrel on the ICE Futures Exchange.

Meanwhile, gasoline futures for October were down nearly one percent to $1.674 a gallon, getting closer to pre-Harvey levels as country is slowly normalizing.

Refineries and other oil infrastructure started a gradual recovery. Texas Governor Greg Abbott said on Sunday total estimated damages of Harvey stood between $150 billion and $180 billion.

Exxon Mobil, Halliburton and Chevron have already announced reopening of their plants. Institutions such as Texas A&M University and the University of Houston will also be reactivated.

Experts noted that it will take several months until America’s oil industry recovers in full. According to Texas Department of Public Safety, 190,000 homes suffered damages and 13,500 were destroyed entirely by heavy flooding.


Ahead in the week, market players will be looking at fresh crude and refined products inventories from the American Petroleum Institute on Wednesday and official data from the US Energy Information Administration on Thursday. Baker Hughes’ weekly rig count is due Friday.

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