Wednesday, 6 September 2017

What’s next? – GOLD, OIL 06.09.17

Posted by Valentine at 12:50 Labels:

GOLD

Gold futures were slightly lower in early trading on Wednesday, but held at local highs as geopolitical tensions continued to weigh on market sentiment and FOMC members pushed down expectations for a third rate hike with dovish comments.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.12 percent or $1.60 down at $1,342.90 a troy ounce as of 08:55 GMT.

Tensions in the Korean peninsula were once again boosted by threats from North Korea. A top official said Pyongyang was preparing a “gift packages” to the US if pressures continue.

Last weekend, Kim Jong Un government tested a hydrogen bomb atop a long-range ballistic missile. Earlier, another missile flew over Japan’s northern side.

Meanwhile, South Korea said its neighbour is currently preparing further missile tests for the next few days. Gold is safe-haven assets and it benefits in periods of risk and uncertainty.

Gold is also supported by a weaker US dollar. The American currency extended loses on Tuesday in the light of dovish comments from FOMC officials regarding interest rates.

Fed Governor Lael Brainard said the regulator should be “cautious about tightening policy," as inflation levels remain below Federal Reserve targets.

Meanwhile, Minneapolis Federal Reserve Bank President Neel Kashkari said that rate hikes could be doing “real harm” to the economy, pointing out low inflation and employment growth.

According to Fed funds tracked by CME Group’s FedWatch program, market participants are currently pricing in a 31 percent probability of a 25 basis points interest rate move by December.

Ahead in the session, traders will be focusing on the ISM non manufacturing PMI for August at 14:00 GMT, with a 55.3 reading eyed. Fed’s Beige Book is due at 18:00 GMT.

OIL

Oil futures were up in early trading hours on Wednesday, following prior session strong gains as market participants awaited fresh US stockpiles to weigh the impact of tropical storm Harvey.

As US markets were closed on Monday, the releases of crude and refined products inventories from the American Petroleum Institute and the Energy Information Administration were delayed one day. Today, API data will be available as of 20:30 GMT.

Official figures will be release on Thursday as of 15:00 GMT, with market analysts predicting a 4.7 million barrels increase. Last week, the agency said crude stockpiles fell by 5.3 m barrels.

The US West Texas Intermediate crude futures were trading 0.16 percent higher at $48.74 per barrel as of 08:05 GMT, while the London-based Brent contracts were up 0.30 percent to trade at $53.54 per barrel on the ICE Futures Exchange.

In the previous session, crude prices moved higher after key refineries said key plants in the Gulf coast were going back to work following the hurricane.

Gasoline futures notched down by 0.5 cents to trade at $1.675 a gallon as concerns of a massive supply shortage continued to fade among investors.

Still, the situation in Texas continues to be delicate, with market experts saying it will take months until the oil industry can recover in full from the heavy flooding caused by Harvey.

Now attention is directed to hurricane Irma, a category 5 storm, that is now moving towards key shipping lanes in the Caribbean.

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