Thursday, 21 September 2017

What’s next? – GOLD, OIL 21.09.17

Posted by Valentine at 11:31 Labels:

GOLD

Gold prices fell sharply in Asian hours on Thursday as the Federal Reserve announcement boosted expectations for a third rate hike later this year.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 1.15 percent lower at $1,301.30 a troy ounce as of 06:25 GMT.

The Federal Reserve concluded its September monetary policy meeting on Wednesday, meeting analysts expectations regarding its interest rate decision to leave them unchanged in a range between 1 percent and 1.25 percent.

However, the central bank took investors by surprise saying a third rate hike is still likely to happen by the end of this year. Investors were doubtful due to weaker-than-expected labor market conditions and inflation growth.

The central bank said it will start reducing its massive $4.5 trillion balance sheet in October, marking an end to its post-crisis stimulus program.

On the data front, traders are looking ahead to the latest initial jobless claims count at 12:30 GMT and the Philadelphia Fed manufacturing index for September by the same hour.

According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 65.8 percent probability of a 25 basis points rate hike by December.

Gold is a dollar-denominated commodity and one of the most popular safe-haven assets. Those factors make this metal very sensitive to changes in US monetary policy.

OIL

Oil futures were slightly lower in early trading hours on Thursday, with market participants digesting official inventory data and looking ahead to the weekly rig count later in the week.

The US West Texas Intermediate crude futures were trading 0.02 percent lower at $50.68 per barrel as of 05:00 GMT, while the London-based Brent contracts were down 0.18 percent to trade at $56.19 per barrel on the ICE Futures Exchange.

Crude benchmarks settled in green territory on Wednesday, with a downbeat crude and refined products stockpiles report from the US Energy Department counteracted by expectations that the Organization of the Petroleum Exporting Countries will extend its production cuts in 2018.

The US Energy Information Administration said crude inventories increased by 4.6 million barrels in the week ended September 15, comfortably above an initially estimated 3.4 million barrels build. These figures marked the third consecutive weekly growth in crude stockpiles.

As for gasoline stocks, the count went down by 2.13 million barrels, little less than the expected 2.14 million barrels decline. Distillates inventories plunged by 5.7 million barrels, breaking analysts’ predictions for a decrease of only 1.6 million barrels.

US stockpiles are still feeling the effects of hurricane Harvey, the tropical storm that paused operations and even damaged some of the country’s key refineries with heavy flooding.

Meanwhile, speculation that OPEC members will extend the so-called output cuts deal beyond its deadline in March 2018 is currently supporting crude prices.

Iraqi oil minister Jabar al-Luaibi has recently said that his nation and other OPEC producers, led by Saudi Arabia, are discussing a potential renewal of the agreement.

Earlier this year, OPEC and non-OPEC countries agreed to let the production deal run until March from its initial data in November 2016, keeping the same cuts target at 1.8 million bpd.

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