Tuesday, 10 October 2017

What’s next? – GOLD, OIL 10.10.17

Posted by Anonymous at 11:11 Labels:

GOLD

Gold futures were higher in early trading hours on Tuesday as tension on the Korean peninsula continued to increase as President Trump suggested military action is the only way out.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.35 percent higher at $1,289.50 a troy ounce as of 07:20 GMT.

The yellow metal traded in green territory on Monday, as renewed geopolitical tensions in the Korean peninsula supported demand for safe-haven assets.

“Our country has been unsuccessfully dealing with North Korea for 25 years, giving billions of dollars & getting nothing. Policy didn't work!” President Donald Trump tweeted on Monday.

Last weekend, reports showed that North Korea is preparing a new long-range missile test for the upcoming days, rising uncertainty over how the Trump administration will respond to threats.

The dollar came under pressure following these developments in the Korean crisis, which is seen as positive factor for the precious metal.

Gold is a dollar-denominated commodity and a weaker greenback makes it less expensive for investors holding foreign currencies.

However, the American currency was supported by Friday’s US employment data, which was interpreted as potentially boosting inflation in the near term.

Despite the economy lost 33,000 jobs in September, the Labor Department said the unemployment rate fell to 4.2 percent, a level not seen since 2001. Meanwhile, average hourly earnings increased by 2.9 percent year over year.

Growing wages are seen as a sign of future higher inflation, a benchmark that Federal Reserve authorities keep very close in mind when deciding about monetary policy adjustments.

According to Fed funds tracked by CME Group’s FedWatch program, investors are pricing in a 89.2 percent chance of a 25 basis points interest rate hike by December.

On the data front, traders will be paying attention to Germany’s trade balance figures for August, industrial and manufacturing production and trade balance in the United Kingdom.

OIL

Oil futures edged up on Tuesday as market participants were cheered by OPEC’s remarks.

The US West Texas Intermediate crude contracts were 0.22 percent up at $49.69 a barrel by 07:20 GMT. Elsewhere, Brent crude futures were up 0.27 percent at $55.94 a barrel.

Crude benchmarks settled higher on Monday, as OPEC Secretary General Mohammad Barkindo assured investors that negotiations over the output cuts agreement are currently in development.

“The process of global destocking continues, both onshore and offshore with positive developments in recent months showing not only a quickening of the process but a massive drainage of oil tanks across all regions,” Barkindo said on Monday.

The Organization of the Petroleum Exporting Countries will meet in Vienna on November 30 to assess the global impact of the current production deal and the possibility of an extension.

The agreement has already been extended in May, 2016 beyond the first deadline (June, 2016) for a nine-month period until March 2018 at a volume of 1.8 million barrels per day.

However, gains were capped by oil platforms in the Gulf of Mexico returning to service as Tropical Storm Nate did not have a strong impact on infrastructure.

At first, market participants speculated with a potential shut down of key oil infrastructure in the Gulf, where 90 percent of the US oil production capacity is concentrated.

Ahead this week, traders will be focusing on the releases of two separate reports from OPEC and the International Energy Agency monthly reports on supply and demand levels.

Also, industry estimates on crude stockpiles by the American Petroleum Institute will be available on Wednesday and official data from the Energy Information Administration on Thursday.

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