Wednesday, 25 October 2017

What’s next? – GOLD, OIL 25.10.17

Posted by Valentine at 11:02 Labels:

GOLD

Gold futures were lower in early trading hours on Wednesday, as safe-haven assets came under pressure on the back of renewed optimism over Trump’s tax reform.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.30 percent to $1.274.50 a troy ounce as of 04:45 GMT.

The yellow metal settled lower on Tuesday as market players continued to play at the risk-on side and as a strengthening US dollar contributed to restart the downward movement.

The US dollar index, which gauges the greenback against six major rivals, was trading at 93.87 by the time of this writing, up 0.22 percent.

The American currency surged based on new signs pointing at a closer tax reform from the Trump administration and with economic data increasing expectations for further rate hikes.

According to sources, House Republicans are planning to introduce their long-awaited tax bill on November 1. News boosted speculation about Trumpflation that tax cuts might create.

Market players believe consumers with more cash on their pockets are likely to spend more, pushing demand and prices up, rising inflation and therefore, leaving no other option to policymakers than to implement faster adjustments to normalize monetary policy.

Markit Economics released its US Manufacturing Purchasing Managers' Index on Tuesday, which came in at 54.5 for October, showing a positive development from a prior month 53.1 and coming above economist estimated reading of 53.5.

The Services PMI index rose to 55.9, also moving above expectations for a 55.6 reading in October. Services are growing steady, with staff hirings rising as well as business optimism.

Ahead in the session, traders will be paying attention to the German lfo business climate index for October as of 08:00 GMT, UK’s third-quarter economic growth rate half an hour later and US durable goods orders and new home sales at 12:30 GMT and 14:00 GMT respectively.

OIL

Oil futures were mixed in early trading hours on Wednesday as market participants digested a surprising inventory report from the American Petroleum Institute.

The US West Texas Intermediate crude contracts were down 0.08 cents to $52.43 per barrel as of 04:45 GMT. Brent futures were up 0.08 cents, or 0.14 percent, to $58.41 a barrel.

API’s weekly report said crude stockpiles increased by 519,000 barrels last week, while gasoline inventories eased by 5.753 million barrels and distillate stocks fell 4.949 million barrels.

Crude benchmarks settled in green territory on Tuesday as Saudi Arabia promised to take all necessary measures to end the oil supply glut.

Both contracts posted significant gains in the previous session. WTI futures added up to 1.1 percent, while Brent prices were up by 1.50 percent in late trade.

Saudi Arabia oil minister Kalid al-Falih said Tuesday the kingdom is ready to “do whatever it takes” to rebalance the oil market in the near future.

"When we get closer to that (five-year average) we will decide how we smoothly exit the current arrangement, maybe go to a different arrangement to keep supply and demand closely balanced so we don't have a return to higher inventories," said Khalid al-Falih.

His comments boosted expectations that the Organization of the Petroleum Exporting Countries will extend its controversial output cuts agreement beyond March 2018 and even step up reductions target.

Back in May, OPEC and non-OPEC producers led by Russia agreed to extend production cuts for a nine-month period until March, but left cuts target unchanged at 1.8 million barrels per day.

Meanwhile, the ongoing political tension between Iraq, and the Kurdish region continued to worry traders as crude volume flowing through Iraq's northern pipeline to Ceyhan in Turkey increased further from 200,00 bpd to 300,000 bpd, according to local sources.

Today investors will be paying attention to the release of crude and refined products inventories by the US Energy Information Administration as of 14:30 GMT.

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