Wednesday, 4 October 2017

What’s next? – GOLD, OIL 04.10.17

Posted by Valentine at 11:07 Labels:

GOLD

Gold futures edged higher in Asian trade on Wednesday, as markets in China, South Korea and Taiwan were closed for holidays and as investors prepared for a speech from Federal Reserve Chairwoman Janet Yellen later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.31 percent higher at $1,278.60 a troy ounce as of 07:20 GMT.

The yellow metal was able to settle in green territory on Monday as the US dollar retreated from six-week highs in the light of falling benchmark treasury yields.

The US dollar index, which gauges the greenback against a basket of six major rivals, was trading at 93.32 by the time of this writing, down 0.10 percent.

Bullion prices have been trapped in a narrow $7 range in the last few days, moving close to seven-week lows as the American currency strengthened across the board on the back 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.

Expectations for a third rate hike in 2017 were boosted last week by remarks from Fed Chair Janet Yellen, who said raising rates “too gradually” could overheat the labor market.

Today, Yellen will participate at the Community Banking in the 21st Century Conference. She is scheduled to speak as of 19:15 GMT and traders will be trying to get more “hawkish” support.

The Commodity Futures Trading Commission (CFTC) reported on Friday that net bullish positions on the precious metal declined to 212,600.

A rising interest rate environment promotes demand for risky assets and the dollar, making gold a less attractive and more expensive choice for investors holding foreign currencies.

OIL

Oil futures moved down in early trading hours on Wednesday following mixed industry estimates on stockpiles, pushing prices back to the $50 per barrel mark.

The American Petroleum Institute reported a 4.08 million barrels reduction in crude inventories, outperforming comfortably an originally forecasted 467,000 barrels draw.

Gasoline supplies rose by 4.91 million barrels, above a 967,000 barrels addition seen. Distillates notched down by 584,000 barrels, nearly half of the predicted 1.1917 million barrels drop.

Ahead in today’s session, official data from the US Energy Information Administration will be available as of 14:30 GMT, with analysts pointing at a 756,000 barrels reduction in crude stocks.

Crude benchmarks settled in red territory on Tuesday in the light of mixed inventory data, which increased concerns about the future stability of commodities.

Traders believe higher energy prices could encourage US shale producers to ramp up their production to take advantage of higher quotes. However, that would push prices down again.

Meanwhile, OPEC Secretary-General Mohammad Barkindo assured on Tuesday that compliance with the oil cartel’s production cuts agreement was extremely.

A day earlier, Reuters reported that OPEC monthly output rose by 50,000 barrels a day in September and compliance with the deal dropped to 86 percent.

According to news agency sources, the increase in production was mainly due to growing outputs in Nigeria and Libya, the two nations exempted from the cuts deal.

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