What’s next? – GOLD, OIL 06.11.17

GOLD

Gold prices notched down in Asian hours on Monday despite increasing political risk in the Middle east as a Saudi Arabia arrests dozens of officials as part of a massive anti-corruption operation, while the government intercepted a Yemen-borne ballistic missile over Riyadh.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.10 percent to $1.270.50 a troy ounce as of 05:05 GMT.

Over the weekend, Saudi Arabia’s King Salman bin AbdelAziz announced the formation of a committee chaired by Crown Prince Mohammed bin Salman that will investigate several princes and officials possibly related to corruption.

According to the White House, President Donald Trump spoke with King Salman on the phone to discuss counterterrorism actions following the interception of the missile, as well as the "the continuing threat of Iranian-backed Houthi militias in Yemen".

The yellow metal ended last week in red territory as the dollar gained following a batch of upbeat economic data from the world’s first economy.

The US dollar index, which gauges the greenback against six major rivals, was trading unchanged at 94.85 by the time of this writing.

Factory orders for American-made products rose for a second-straight month in September by 1.4 percent, above an estimated 1.3 percent build and a previous 1.2 percent.

The Institute for Supply Management said its non-manufacturing purchasing managers’ index (PMI) increased to 60.1, a level not seen since 2005, compared to a forecasted 58.5 reading.

But the main event on Friday was the release of October’s employment report. According to data from the Labor Department, average hourly earnings showed no change last month. Nonfarm payrolls came in at 261,000 jobs, missing an estimated addition of 310,000. The unemployment rate stood at 4.1 percent, moving a tick down from the prior month.

Despite labor figures were not as solid as initially thought, expectations for a Federal Reserve third-rate hike in December suffered no significant variations.

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.

Gold is very sensitive to changes in US interest rates. A higher interest rate environment makes the metal less attractive for market participants as they turn into high-yielding assets.

OIL 06.11.17

Oil futures extended gains in Asian trading hours on Monday as political instability in Saudi Arabia increased uncertainty over the leadership of the world’s second largest oil producer.

The US West Texas Intermediate crude contracts were up 0.20 percent to $55.75 per barrel as of 05:25 GMT. Brent futures were up 0.32 percent, to $62.27 a barrel.

In the last 24 hours, Saudi Arabia’s government has arrested dozens of royals and officials as part of a massive anti-corruption operation. In the meantime, the country’s military successfully intercepted a Yemen-borne ballistic missile over Riyadh.

Over the weekend, Saudi Arabia’s King Salman bin AbdelAziz announced the formation of a committee chaired by Crown Prince Mohammed bin Salman that will investigate several princes and officials possibly related to corruption.

According to the White House, President Donald Trump spoke with King Salman on the phone to discuss counterterrorism actions following the interception of the missile, as well as the "the continuing threat of Iranian-backed Houthi militias in Yemen".

Crude benchmarks settled in green territory on Friday, extending to their highest level in more than two years on expectations that OPEC and a group of non-OPEC producers will soon announce the extension of the so-called output cuts agreement.

The deal is set to end in March 2018, but chances are major producers will extend it from six to nine more months. The target volume of cuts remain at 1.8 million barrels per day.

The Organization of the Petroleum Exporting Countries and representatives from independent producers will gather on November 30 in Vienna to discuss a potential extension of the pact.

Oilfield services provider Baker Hughes said on Friday the number of rigs drilling for oil in the United States dropped by eight to 729 units last week. This could be interpreted a sign for a near-future slowdown of US crude oil production levels.

Last week, the US Energy Information Administration said crude inventories dropped by 2.4 million barrels in the week ended October 27. Gasoline stockpiles plunged by 4 million barrels.

Fort Financial Services