Tuesday, 3 October 2017

What’s next? – GOLD, OIL 03.10.17

Posted by Valentine at 10:17 Labels:

GOLD

Gold prices edged down in early trading on Tuesday as the US dollar extended gains in Asian hours while Chinese markets remain closed for the week.

The yellow metal is denominated in US dollars. A stronger greenback makes bullion more expensive for investors holding other currencies, restraining its demand.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.11 percent lower at $1,274.40 a troy ounce as of 07:05 GMT.

The US dollar index, which gauges the greenback against a basket of six major rivals, was trading at 93.60 by the time of this writing, up 0.21 percent.

Overnight, the precious metal plunged to a seven week low amid as the safe-haven demand came under pressure following upbeat data from the manufacturing sector, suggesting the economy is accelerating its recovery.

The Institute for Supply Management said on Monday its manufacturing PMI for September came in at 60.8, outperforming expectations for a 58.0 reading and a prior 58.8 from August.

The metal is currently under pressure as traders are continuously unwinding its long positioning in the light of higher expectations for monetary policy adjustments later this year.

According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 76.7 percent probability of a 25 basis points rate hike by December.

Attention this week will be mainly directed to the release of US employment data on Tuesday. Labor market conditions are a key benchmark for the US regulator to define the course of policy. Fed Chair Janet Yellen recently warned about adjusting its configuration “too gradually”.

However, gold losses were capped by preliminary results from Catalonia’s referendum, in which 90 percent of voters or 2.26 million Catalans, opted to form an independent Republic. While the consultation is not legally-bidding, it adds to the political uncertainty in Europe.

OIL

Oil futures notched down in Asian trade on Tuesday as market participants prepared for fresh weekly estimates on crude and refined product stockpiles in the United States.

The US West Texas Intermediate crude futures were trading 0.47 percent lower at $50.38 per barrel as of 07:05 GMT, while the London-based Brent contracts were down 0.62 percent to trade at $55.77 per barrel on the ICE Futures Exchange.

The American Petroleum Institute is due to release its weekly report on crude and refined product inventories as of 20:35 GMT on Tuesday, in anticipation of official data from the Energy Information Administration at 14:30 GMT on Wednesday.

Market analysts are forecasting a 467,000 barrels decline in crude stockpiles, while gasoline stocks are set to increase by 967,000 barrels. Distillates are seen down by 1.19 million barrels.

Crude benchmarks settled in red territory on Monday as reports outlined a possible increase on OPEC’s monthly production level last month, adding concerns about supply disparities.

News agency Reuters reported that the Organization of the Petroleum Exporting Countries ramped up its monthly crude output by 50,000 barrels a day in September, while compliance with its production cuts dropped to 86 percent.

According to the report, the increase in production seems to be a result of growing output in Nigeria and Libya, the two nations exempted from the cuts deal.

The oil cartel and its allies agreed in May to extend the output cuts signed originally in November 2016 for a nine months period at a reduction target of 1.8 million barrels per day.

Oil prices came under pressure last Friday following Baker Hughes’ weekly oil rig count. The oilfield services firm said the number of rigs operating in the United States grew by 6 to 750.

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