What’s next? – GOLD, OIL 01.11.17

GOLD

Gold futures were higher in Asia on Wednesday, with market participants awaiting for the results of a new Federal Reserve monetary policy meeting, while looking ahead to NFP later this week.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.33 percent to $1.274.70 a troy ounce as of 06:40 GMT.

Earlier in the day, the Caixin/Markit manufacturing PMI for October came in at 51.0, showing no change from its previous month reading. China's official manufacturing PMI for October came in at 51.6, falling short from expected values, rising doubts about demand levels in the future.

In Australia, the AIG manufacturing index stood at 51.1, against with a prior reading of 54.2. In Japan, the manufacturing PMI increased to 62.8. Analysts had estimated a 52.5 reading.

Overnight, the yellow metal came under pressure as the US dollar was boosted by a series of upbeat economic reports that lifted expectations of a stronger economic expansion.

The Conference Board’s consumer confidence advanced to 125.9 in October from a previous 119.8, moving comfortably above analysts’ forecast of 121.

In other news, the Chicago Purchasing Managers' Index rose to 66.2, outperforming the September reading of 65.2 and above expectations of 61.

Ahead in the day, traders will closely monitor the release of ADP nonfarm employment change for October at 12:15 GMT, in anticipation of Friday’s Labor Department data.

The Federal Open Market Committee will reveal its statement at 18:00, but there are no monetary policy changes expected. Interest rates are likely to stay between 1.00-1.25 percent.

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 assets with higher yields.

Investors are also keeping an eye on President Donald Trump, who is scheduled to announce its decision on who will replace Fed Chair Janet Yellen next February. Reports are pointing to Federal Reserve Governor Jerome Powell as the prefered person for the job.

OIL

Oil futures edged up in Asian trading hours on Wednesday following upbeat industry estimates of US stockpiles and an unofficial PMI in China that reduced uncertainty over the future.

The US West Texas Intermediate crude contracts were up 0.63 percent to $54.72 per barrel as of 06:40 GMT. Brent futures were up 0.56 percent, to $61.28 a barrel.

Earlier in the day, the Caixin/Markit manufacturing PMI for October came in at 51.0, showing no change from its previous month reading. China's official manufacturing PMI for October came in at 51.6, falling short from expected values, rising doubts about demand levels in the future.

In Australia, the AIG manufacturing index stood at 51.1, against with a prior reading of 54.2. In Japan, the manufacturing PMI increased to 62.8. Analysts had estimated a 52.5 reading.

The American Petroleum Institute said crude inventories in the US dropped by 5.087 million barrels, while gasoline fell 7.697 million barrels and distillates were down 3.106 million barrels.

Analysts had forecasted a 2.575 million barrels draw in crude reserves, a 2.050 million barrels draw in gasoline and a 2.450 million barrels draw in distillates.

The Energy Information Administration will release official data at 14:30 GMT on Wednesday. API and EIA data might often differ significantly.

Crude benchmarks settled in green territory on Tuesday on the back of stronger speculation that OPEC and other independent producers will extend output cuts.

The Organization of the Petroleum Exporting Countries will meet on November 30 to discuss a potential extension of the agreement beyond its current March 2018 deadline.

Fort Financial Services