What’s next? – GOLD, OIL 31.10.17

GOLD

Gold futures dropped in Asian hours on Tuesday, with market participants digesting downbeat economic activity from China, which increases questions about future demand for the metal.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.01 percent to $1.277.60 a troy ounce as of 06:30 GMT.

Earlier in the session, China said its official manufacturing PMI for October came in at 51.6, against an estimated reading of 52, while its non-manufacturing survey stood at 54.3, also falling short from a prior month reading of 55.4.

Also, industrial production in Japan notched down 1.1 percent in September, little less than a predicted 1.5 percent decline. Household spending rose 0.4 percent last month.

In Europe, attention will be directed to Eurozone’s consumer price index for October and the unemployment rate for September will be presented at 10:00 GMT.

In the United States, traders will be monitoring the release of third-quarter unemployment cost index at 12:30 GMT and the S&P/Case-Shiller house price index half an hour later. The Conference Board will show its consumer confidence indicator for October at 14:00 GMT.

On Monday, the yellow metal settled in green territory on the back of a weaker US dollar as speculation over President Donald Trump’s choice for the next Federal Reserve chair seems to be pointing at FOMC Governor Jerome Powell as the prefered candidate.

The Federal Reserve kicks off a new two-day monetary policy meeting later in the day, although there are no expectations for changes as far as interest rates concern. However, tomorrow’s announcement will serve to assess the rhetoric of the regulator before the December decision.

According to Fed funds tracked by CME Group’s FedWatch tool, investors are currently pricing in more than a 90 percent chance of a rate hike by December.

Upbeat reports on the data front capped gains for the precious metal on Monday, with the personal consumption expenditures (PCE) price index, excluding food and energy, increasing 1.3 percent in the last twelve months. Fed keeps its target at 2 percent.

In a separate report, the Commerce Department said consumer spending rose 1 percent last month, the biggest increase seen since August 2009.

OIL

Crude futures were slightly lower in Asia on Tuesday as market players digested a weaker-than-expected activity index in China, which rises concerns about future energy demand levels from the world’s second largest economy.

The US West Texas Intermediate crude contracts were down 0.15 percent to $54.07 per barrel as of 06:30 GMT. Brent futures were down 0.20 percent, to $60.78 a barrel.

Earlier in the session, China said its official manufacturing PMI for October came in at 51.6, against an estimated reading of 52, while its non-manufacturing survey stood at 54.3, also falling short from a prior month reading of 55.4.

Also, industrial production in Japan notched down 1.1 percent in September, little less than a predicted 1.5 percent decline. Household spending rose 0.4 percent last month.

Ahead in the day, traders will be looking at weekly estimates of crude and refined products stockpiles from the American Petroleum Institute.

Analysts are forecasting a 2.575 million barrels decline in crude supplies, a 2.450 million barrels draw in distillates and a 2.050 million barrels reduction in gasoline inventories.

These figures will be followed by official data from the US Energy Information Administration on Wednesday. While both reports are often showing similar results, they might differ significantly.

On Monday, crude benchmarks settled in green territory over rising speculation that the Organization of the Petroleum Exporting Countries will extend its output cuts deal.

OPEC and non OPEC producers are due to gather on November 30 in Vienna to discuss a potential extension of the production cuts agreement.

“OPEC welcomes the clear guidance from the crown prince of Saudi Arabia on the need to achieve stable oil markets and sustain it beyond the first quarter of 2018, [...] Together with the statement expressed by President Putin, this clears the fog on the way to Vienna on Nov 30” said OPEC Secretary General Mohammad Barkindo on Monday.

In other news, investment bank JP Morgan upgraded its 2018 forecast for Brent and WTI contracts by $11 and $11.40 respectively to $58 and $54.63 per barrel.

Fort Financial Services