Friday, 13 October 2017

What’s next? – GOLD, OIL 13.10.17

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GOLD

Gold futures were higher in Asia on Friday, with market participants preparing for the main event of the week: retail inflation in the US, along with FOMC speakers expected to set the tone.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.22 percent higher at $1,299.40 a troy ounce as of 07:20 GMT.

Gold prices were steady on Thursday, remaining close to the $1,300 psychological mark. The dollar strengthened on the back of economic reports, putting a stop to the safe-haven demand.

On Thursday, the US Labor Department said initial jobless claims dropped by 15,000 to a seasonally adjusted 258,000 for the week ended October 7, exceeding a forecasted 7,000 draw.

In other news, the producer price index rose 0.4 percent in September and 2.2 percent in the twelve months through September, up from the previous month reading of 2.0 percent.

Inflation is one of Fed’s most important benchmarks at the moment. Minutes from the regulator’s September policy meeting showed that a large number of policymakers are concerned about low inflation levels, especially as a third rate hike is seen by the end of 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 sensitive to interest rate changes in United States as it is denominated in dollars. Higher interest rates strengthen the greenback and make the metal more expensive.

Ahead in today’s session, traders will be paying attention to the release of consumer price indexes from Germany at 06:00 GMT and the United States as of 12:30 GMT.

Also, attention will be directed to retail sales for September at 12:30 GMT, business inventories for August at 14:00 GMT, along with Michigan University consumer expectations and sentiment.

Investors will carefully monitor speeches from FOMC officials in the day. FOMC members Rosengren, Kaplan and Powell are due to speak as of 12:30 GMT, 15:30 GMT and 17:00 GMT.

OIL

Oil futures were higher in early trading hours on Friday, as market participants digest inventory data from the United States and looked ahead to Baker Hughes’ weekly rig count.

The oilfield services company is due to release its weekly rig count as of 17:00 GMT. Last week, the total count of rigs operating in US soil established at 748 units, falling by 2 units.

The US West Texas Intermediate crude contracts were 1.17 percent up at $51.19 a barrel by 07:20 GMT. Elsewhere, Brent crude futures were down 0.92 percent at $56.77.

Oil futures settled in red territory on Thursday, as the US Energy Information Administration reported a wider-than-expected drop of crude stockpiles last week.

Energy Department figures showed that crude oil supplies declined by 2.75 million barrels in the week ended October 6, compared to expectations for a 1.99 million barrels draw.

Previously, the American Petroleum Institute anticipated a 3.097 million barrels increase in crude stockpiles last week. API data also showed gasoline inventories easing in 1.575 million barrels.

Official data released on Thursday said gasoline inventories added 2.5 million barrels, against an estimated decline of 480,000 barrels, while distillates notched down by 1,5 million barrels.

Crude benchmarks have been rising in the last few days on the back of higher expectations for an extension of OPEC’s output cuts agreement beyond its March 2018 deadline.

The deal, which was originally signed in November 2016, has been extended for a nine-month period back in May, but the oil cartel left unchanged the cuts volume at 1.8 million barrels per day.

Also helping out the commodity was an announcement by OPEC de facto leader Saudi Arabia to reduce its monthly crude exportation from November 2017.

OPEC presented its monthly report on Wednesday, outlining that the oil market is rebalancing progressively. The cartel upgraded its global oil demand forecast by 30,000 barrels per day.

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