What’s next? – GOLD, OIL 06.11.17

GOLD

Gold futures were lower in early trading hours on Tuesday as market participants looked ahead to fresh economic reports and awaited a speech from Federal Reserve Chair Janet Yellen.

On the Comex division of the New York Mercantile Exchange, gold futures were lower 0.20 percent to $1.279.00 a troy ounce as of 07:45 GMT.

The yellow metal ended Monday session in green territory on the back of rising political uncertainty in the Middle East, which boosted safe-haven demand.

Gold prices were able to recover from last week losses on Monday as market players digested the formation of a special committee in Saudi Arabia meant to judge the behaviour of several officials, even some members of the royal family, as part of an anti-corruption operation.

The US dollar notched down following the announcement Federal Reserve Bank of New York William Dudley is preparing to retire earlier than initially forecasted.

Last week, the American currency fell under little pressure after President Donald Trump appointed FOMC Governor Jerome Powell to become the next Fed chair. Powell is seen as more dovish than Yellen, but analysts agreed that no changes to the policy course are expected.

According to Fed funds tracked by CME Group’s FedWatch tool, investors are currently pricing in more than a 90 percent chance of a 25 basis point 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.

The data front on Monday included the release of Germany factory orders for September, which rose by 1.0 percent despite expectations for a 1.5 percent decline.

Also, Germany’s services PMI for October stood at 54.7, below an estimated 55.2 reading, while Eurozone’s services PMI outperformed expectations at 55.0.

Ahead in the day, attention will be directed to German industrial production at 07:00 GMT, UK’s halifax house price index at 08:30 GMT and EU’s retail sales at 10:00 GMT.

But the main events of the day will be speeches from ECB President Mario Draghi at 09:00 GMT and Fed Chair Janet Yellen at 19:30 GMT.

OIL

Oil futures held gains in Asia on Tuesday, as market participants continued to feel cheered by rising political concerns in the Middle East region.

The US West Texas Intermediate crude contracts were down 0.10 percent to $57.27 per barrel as of 07:45 GMT. Brent futures were up 0.06 percent, to $64.29 a barrel.

Crude benchmarks settled higher on Monday, backed by increasing political uncertainty in the Middle East following news Saudi Arabia Crown Prince Mohammed bin Salman will be leading a special committee to investigate and judge old guard elite as part of an anti-corruption initiative.

From ministers, investors to members of the royal family, dozens have been arrested over the weekend. Political analysts believe these measures intend to consolidate Salman’s power.

OPEC de-facto leader Saudi Arabia is currently the world’s second largest oil producer. The anti-corruption crackdown comes in at key time for the kingdom, as speculation is high about a potential extension of the oil cartel’s output cuts agreement beyond its March 2018 deadline.

“There is a general satisfaction with the strategy of 24 countries that signed a declaration of cooperation,” Saudi Oil Minister Khalid al-Falih said last Friday.

“Everybody recognises the job isn’t done yet by any means, we still have significant amount of work to do to bring inventories down. Mission is not yet complete, more needs to be done,” al-Falih added.

The Organization of the Petroleum Exporting Countries and representatives from producers external to the cartel will meet on Nov 30 in Vienna to negotiate over the extension of the deal.

Ahead in the session, traders will be paying attention fresh inventory data from the American Petroleum Institute at 21:30 GMT. Last week, the institute reported a 5 million-barrel reduction in crude stockpiles, which actually turned out to really be half of that number.

Fort Financial Services