What’s next? – GOLD, OIL 02.11.17

GOLD

Gold prices rose in Asian trading hours on Thursday following a widely expected abstention to move Federal Reserve interest rates and as the greenback held on a weaker position.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.16 percent to $1.279.30 a troy ounce as of 07:20 GMT.

Market participants are mainly focused on Friday’s nonfarm payrolls for October, which comes along with the unemployment rate and average hourly earnings as of 12:30 GMT.

Ahead in today’s session, attention will be directed to initial jobless claims at 12:30 GMT, with an estimated build of 2,000 to 235,000. At the same time, markets will receive third-quarter nonfarm productivity and unit labor costs, seen at 2.4 percent and 0.5 percent respectively.

Traders will also monitor a batch of FOMC speakers, including Governor Jerome Powell, currently the main candidate to replace Janet Yellen as Chair of the Federal Reserve, at 12:30 GMT. Other FOMC members like Dudley and Bostic are set for 16:20 GMT and 22:15 GMT.

On Wednesday, the US regulator opted to keep its monetary policy configuration without changes, while expressing the economy is in a “solid” position.

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.

On the data front, ADP and Moody's Analytics reported a 235,000 jobs increase in the US private sector in October, beating an expected 200,000 jobs build.

In other news, the Institute for Supply Management's PMI index came in at 58.7 in October, falling short from an initially estimated reading of 60.

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.

OIL

Oil futures were higher in Asian trading on Thursday as US official crude inventories continued to decline last week, rising speculation about a sooner-than-expected market balance.

The US West Texas Intermediate crude contracts were up 0.04 percent to $54.32 per barrel as of 07:20 GMT. Brent futures were up 0.08 percent, to $60.54 a barrel.

On Wednesday, crude benchmarks settled in red territory despite reductions seen in crude and gasoline. Oil exports increased by 46,000 barrels per day to 9.55 million barrels per day, according to the US Energy Information Administration.

Increasing US crude exports seems to be a result of a recent widening of the spread between WTI and Brent oil contracts, which stimulates demand for the US-based commodity.

The agency also reported a 2.4 million barrels decline in crude stockpiles in the week ended October 27, more than the originally expected 1.8 million barrels draw.

As for gasoline supplies, the drop was of 4 million barrels, against expectations of a 2.1 million barrels decline. Distillate products, a category that includes heating oil and diesel, went down by nearly 320,000 barrels, falling really short from a predicted draw of 2.1 million barrels.

Investors remain carefully positive about price prospects for the near future, especially as the Organization of the Petroleum Exporting Countries is likely to extend its output cuts deal beyond the current March 2018 deadline. The next meeting in Vienna takes place on November 30.

Ahead in the week, Baker Hughes’ weekly oil rig count is due on Friday at 17:00 GMT.

Fort Financial Services