What’s next? – GOLD, OIL 03.11.17

GOLD

Gold futures were slightly lower in Asian trading hours on Friday as market participants digested Powell’s appointment as Fed Chair and as traders prepared for nonfarm payrolls later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.02 percent to $1.277.80 a troy ounce as of 05:20 GMT.

The yellow metal ended in green territory on Thursday following President Donald Trump’s decision to appoint FOMC Governor Jerome Powell as the new head of the Federal Reserve.

Powell has been a Fed Governor since 2012 and he is seen as less hawkish than Janet Yellen. However, analysts believe he will not interfere with the Fed’s monetary normalization process.

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.

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.

Bullion prices were partially supported by a weaker dollar, which continued to fall despite upbeat labor data increasing expectations for a better-than-expected nonfarm payrolls report.

According to the US Labor Department, initial jobless claims dropped to 229,000 last week, down from a previous reading of 234,000 and 235,000 seen.

In a separate report, third-quarter productivity increased by 3.0 percent, above expectations for a 2.4 percent build. Unit labor costs were in line with estimated values at a plus 0.5 percent.

Ahead in today’s session, focus will be at October’s labor data at 12:30 GMT, including average hourly earnings, nonfarm payrolls and the unemployment rate. Economists are expecting to see an addition of 310,000 jobs in the US private sector and a 0.2 percent rise in salaries.

Attention will also be directed to trade balance figures for September as of 12:30 GMT, with a $43.20 billion deficit seen. Factory orders for September and ISM non-manufacturing PMI for October are due at 14:00 GMT.

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 0.28 percent to $54.69 per barrel as of 07:55 GMT. Brent futures were up 0.16 percent, to $60.72 a barrel.

Crude benchmarks settled in green territory on Thursday as ongoing OPEC-led production cuts boosted expectations that the oil market is rebalancing faster than expected.

Saudi Energy Minister Khalid Al-Falih said Thursday that the Kingdom continued to reduce its crude oil production in October, adding compliance with output cuts had been “excellent.”

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

According to official data released on Thursday, Russia, the leading non-OPEC producer, continued to comply with the agreement despite its production rose to 10.93 million bpd in October from a previous month 10.91 million bpd.

Earlier this week, the US Energy Information Administration said weekly production rose to 9.55 million barrels per day, adding 46,000 from the previous week.

EIA data showed a 2.4 million barrels drop in crude supplies in the week ended October 27, more than the originally estimated draw of 1.8 million barrels. Gasoline inventories fell by 4 million barrels against expectations of a 2.1 million barrels decline.

Attention on Friday will be directed to Baker Hughes’ US oil rig count at 17:00 GMT.

Fort Financial Serivces