Wednesday, 11 October 2017

What’s next? – GOLD, OIL 11.10.17

Posted by Valentine at 11:42

GOLD

Gold futures were lower in Asian trading on Wednesday as positive sentiment continued to support demand for risky assets, despite some uncertainty from the political sphere.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.28 percent lower at $1,290.20 a troy ounce as of 07:25 GMT.

The yellow metal traded close to a two-week peak on Tuesday, as market sentiment came under pressure due to rising geopolitical concerns on the Korean peninsula and Catalonia.

Market players remained cautious as reports showed that Pyongyang is preparing a new long-range missile launch for the upcoming days.

North Korea celebrated the 72nd anniversary of the founding of its ruling Workers' Party, with thousands of people marching on the streets, carrying flowers and bowing in front of statues of previous leaders Kim Il-sung and Kim Jong-il.

The precious metal was up nearly by 0.50 percent at $1,291.73 a troy ounce, marking its highest level since September 27. Now the $1,300 seems like a reachable target if geopolitical concerns continued to affect demand for risky assets.

Meanwhile in Spain, the Catalan president, Carles Puigdemont, announced that he will suspend a declaration of independence “to open a period of dialogue” with the Federal Government.

Spanish Partido Popular had previously warned the Catalan leader that he could face a sentence if he moved forward with the declaration of independence before the parliament.

The dollar continued to find support from Friday’s US employment data. The recent increase in wages boosted expectations for a Federal Reserve rate hike later this year.

According to Fed funds tracked by CME Group’s FedWatch program, investors are pricing in a 86.7 percent chance of a 25 basis points interest rate hike by December.

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

OIL

Oil futures were higher on Wednesday, with traders looking ahead to OPEC’s monthly report and industry estimates for US crude and refined products inventories later in the day.

The US West Texas Intermediate crude contracts were 0.20 percent up at $51.02 a barrel by 07:30 GMT. Elsewhere, Brent crude futures were up 0.07 percent at $56.65 a barrel.

Crude benchmarks gained on Tuesday as OPEC leader Saudi Arabia pledged to reduce monthly crude exports in a context of rising expectations that market rebalancing is in progress.

Tuesday was the best session in the last two weeks as market sentiment was boosted by Saudi Arabia’s vow to cut its November crude exports by 7 percent or 560,000 barrels per day.

The goal behind this proposal is to provide further support to the rebalancing process.

The differential between supply and demand in crude markets is likely to narrow in the near term as global demand continues to grow, offering support to energy prices.

Supporting crude prices were also comments from OPEC General Secretary, Mohammed Barkindo, who called US shale oil producers to joint efforts to curb global supply levels.

"We urge our friends, in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply-driven cycle," Barkindo said.

On Wednesday, the oil cartel will release its monthly report on supply and demand levels. Also, the American Petroleum Institute will present its crude and refined products stockpiles estimations for the week ended October 6.

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