What’s next? – GOLD, OIL 27.10.17

GOLD

Gold futures traded lower in early hours on Friday with market participants preparing ahead of key economic data from the US later in the session.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.08 percent to $1.268.60 a troy ounce as of 05:05 GMT.

The yellow metal dropped sharply on Thursday as the greenback reached three-month highs in the light of a rapid weakening of the euro triggered by the European Central Bank decision to reduce its bond purchases while extending its quantitative easing programme for nine-months.

The European Central Bank will start purchasing 30 billion euro per month of bonds, almost half of its previous target level. However, the bond purchasing programme has been extended until September 2018, a decision that was widely expected.

The regional currency came under pressure despite there was nearly no surprises from the announcement. ECB president Mario Draghi’s remarks were carefully examined by market participants in search for signs of further measures affecting the monetary policy configuration.

Gold is sensitive to moves in the US dollar rate as it is a dollar-denominated commodity. A stronger base currency makes the metal more expensive and less attractive for investors holding foreign money.

Also, economic reports from the US supported the American currency across the board. Attention today will be directed to the release of the third quarter GDP at 12:30 GMT.

Investors will also monitor the releases of Michigan University consumer expectations and confidence due as of 14:00 GMT.

On Thursday, the National Association of Realtors’ said pending home sales for September were flat, falling below an originally forecasted increase of 0.2 percent.

The Department of Labor said initial jobless claims rose by 10,000 to a seasonally adjusted 233,000 in the week ended October 21, above an estimated build of 12,000.

OIL

Oil futures were mixed in early Asian hours on Friday, with market participants looking ahead to the weekly US rig count as they continued to digest mixed inventory data.

The US West Texas Intermediate crude contracts were down 0.04 percent to $52.62 per barrel as of 05:05 GMT. Brent futures were up 0.13 percent, to $59.38 a barrel.

Today, attention will be directed to Baker Hughes’ weekly oil rig count. The report will be released as of 17:00 GMT. These figures are used to anticipate production levels in the US.

Last week, Baker Hughes reported a 7 rigs decline in the world’s first economy to 736 units, which marked a third-consecutive weekly draw. Total active rigs in the US stood at 913 units.

On Thursday, crude benchmarks settled to the downside as weekly inventories from the US Energy Information Administration weighed on market expectations for a soon rebalance.

According to the EIA, crude supplies increased by 856,000 barrels in the week ended October 22, compared to an expected draw of 2.6 million barrels.

These figures were aligned with a previous estimation by the American Petroleum Institute, which reported a rise of 519,000 barrels in crude stockpiles last week.

Meanwhile, gasoline took a different path and fell by 5.5 million barrels against expectations for a 17,000 barrels drop. Distillate supplies eased by 5.2 million barrels.

Earlier this week, crude prices were supported by Saudi Arabia’s pledged to “do whatever necessary” to end the ongoing output glut in the market.

Speculators are looking anxiously to November 30, when OPEC and non-OPEC producers will gather in Vienna to discuss a potential extension of the production cuts agreement beyond its current March 2018 deadline.

Fort Financial Services