Thursday, 28 September 2017

What’s next? – GOLD, OIL 28.09.17

Posted by Valentine at 10:43 Labels:

GOLD

The yellow metal extended losses in early trading hours on Thursday as the US dollar continued to strengthen on the back of higher expectations for a rate hike and as the GOP released new details on Trump’s tax reform.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.3 percent lower at $1,283.40 a troy ounce as of 05:10 GMT.

After months of negotiations between the Trump administration and the Republican leadership, both agreed on a framework that explains how the bill will benefit the American people.

If the bill gets green light by Congress, the tax system will be subjected to major changes, including the reduction of the corporate tax rate from 35 to 20 percent, as well as a simplification of the current scale for individual taxpayers.

For months, Wall Street has been speculation on the impact of lower tax rates for businesses. These measures are expected to boost the economy and promote repatriation among big companies like Apple or Microsoft.

The US dollar index, which gauges the greenback against a basket of six major rivals, was trading at 93.41 by the time of this writing, adding 0.25 percent.

Gold is denominated in US dollars and therefore, a stronger currency makes it a less attractive investment for investors holding foreign money.

At the same time, markets continued to speculate on a third rate hike from the Federal Reserve later this year as Fed Chairwoman Janet Yellen warned about the negative effects of adjusting monetary policy too gradually, especially pointing out the risk of overheating the labor market.

According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 76.4 percent probability of a 25 basis points rate hike by December.

Ahead in today’s session, attention will be directed to speeches of FOMC members George and Stanley Fischer as of 13:45 GMT and 14:15 GMT respectively. A fresh reading on the second quarter US gross domestic product is up at 12:30 GMT, together with August trade figures and initial jobless claims.

OIL

Oil prices edged down in early trading hours on Thursday, as market participants opted to take profits following strong gains in the light of falling crude stockpiles.

The US Energy Information Administration said crude inventories dropped by 1.8 million barrels in the week ended September 22, compared to a forecasted 3.4 million barrels build.

The draw in crude stockpiles was anticipated by the American Petroleum Institute on Tuesday. Their report showed a 761,000 barrels reduction. EIA and API data can often differ.

The US West Texas Intermediate crude futures were trading 0.27 percent lower at $52.00 per barrel as of 05:05 GMT, while the London-based Brent contracts were down 0.26 percent to trade at $57.75 per barrel on the ICE Futures Exchange.

The EIA report also showed that gasoline supplies increased, while distillates plunged as expected. Data supported oil prices despite some key American refiners are coming back to play following hurricane Harvey, which caused serious damages in the Gulf Coast last month.

Investors continue to monitor developments around OPEC’s output cuts agreement. The oil cartel is negotiating an extension beyond its March 2018 deadline.

Ahead this week, traders will be pending on the release of oilfield services Baker Hughes oil rig count in the United States, which last week showed a second weekly consecutive decline.

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