Thursday, 19 October 2017

What’s next? – GOLD, OIL 19.10.17

Posted by Valentine at 11:52 Labels:

GOLD

Gold futures extended losses for a fourth consecutive session on Thursday, moving to their lowest level nearly a week as investors continued to weigh the uncertainty surrounding the decision of will replace Federal Reserve Chair Janet Yellen.

Today, US President Donald Trump will receive Yellen to talk about the process of finding a replacement. Reports showed that Trump is also considering an extension of Yellen’s term.

Among outsiders considered for the job, there is Stanford University economist John Taylor, seen as pro policy adjustment person. According to Taylor’s vision, Fed funds rate should stand much higher than they currently do.

Other people regarded by the White House are Fed Governor Jerome Powell and former Fed official Kevin Warsh. They also are in the potential list of successors.

President Donald Trump will take the decision in the "coming days," said White House spokeswoman Sarah Sanders on Wednesday, rising speculation over the matter.

The US dollar increased as from the potential candidates for the job, most of them are seen as hawkish for Federal Reserve interest rates.

The US dollar index, which gauges the greenback against a basket of six major currencies, was trading 0.11 percent higher by the time of this writing at 93.34.

According to Fed funds tracked by CME Group’s FedWatch program, investors are pricing in more than a 90 percent chance of a 25 basis points interest rate hike by December.

Gold is extremely sensitive to variations in US interest rates. Higher interest rates increase demand for risky assets and the US dollar, dampening interest for bullion.

OIL

Oil futures traded near their highest level in three weeks on Thursday, supported by signals that the market is heading for a rebalance as traders digested US inventory data.

The US West Texas Intermediate crude contracts were up 73 cents, or 1.40 percent, to $51.53 per barrel as of 08:35 GMT, staying close to a three-week high of $52.37.

Meanwhile, Brent futures added 78 cents, or 1.34 percent, to $57.37 a barrel. In the previous session, the international benchmark reached its strongest level since Sept 28 at $58.54.

The US Energy Information Administration said on Wednesday that crude stockpiles dropped by 5.7 million barrels in the week ended October 13. Gasoline inventories rose by 900,000 and distillate stockpiles increased by 500,000 barrels.

The agency also showed that crude output fell 11 percent from the prior week to 8.4 million, especially due to some interruptions in production on the back of Hurricane Nate.

Crude benchmarks were also supported by speculation over a potential extension of OPEC’s production cuts beyond its March 2018 deadline. OPEC and non-OPEC members extended cuts for nine months by 1.8 million barrels a day.

Meanwhile, a conflict between Iraqi and Kurdish forces near oil fields in Kirkuk continued to support prices.

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