What’s next? – GOLD, OIL 10.11.17

GOLD

Gold futures were trading slightly lower in Asia despite market participants continued to feel a bit strange about risky assets.

On the Comex division of the New York Mercantile Exchange, gold futures were lower 0.26 percent to $1.284.10 a troy ounce as of 08:05 GMT.

The yellow metal increased to a three-week peak on Thursday as the American currency felt under pressure over speculation that the US Senate would delay Trump’s tax reform for a year.

At the time, the GOP Senate is reviewing the bill before it moves to the Democrat side. On Thursday, reports said some Republicans will propose delaying corporate tax cuts until 2019.

The preliminary bill intends to cut the corporate rate from 35 percent to 20 percent and simplify the current seven-bracket individual tax paying system to only three categories.

Banks and financial institutions, which have been one of the main drivers for this year’s Wall Street rally, are paying close attention to this new regulation. If the bill is delayed or suffers substantial changes, then US markets could face a serious downward correction.

Higher uncertainty over this issue has pushed investors all around world into safe-haven assets such as the precious metal, while dampening demand for risky assets.

The US dollar index, which measures the greenback against six major competitors, was trading at 94.50, adding 0.15 percent by the time of this writing.

Dollar-based gold tends to perform better when the greenback losses power in the market, as it makes the metal less expensive for investors holding foreign currencies.

On Thursday, market players continued to monitor President Trump’s Asia tour. Earlier, Trump warned North Korea that threatening the US or any of its allies “would be a fatal miscalculation."

OIL

Oil futures were lower in early trading hours on Friday as market players continued to digest disappointing inventories from the US and looked ahead to Baker Hughes’ rig count.

The US West Texas Intermediate crude contracts were down 0.17 percent to $57.07 per barrel as of 08:05 GMT. Brent futures were down 0.23 percent, to $63.78 a barrel.

Crude benchmarks settled in green territory on Thursday as an ongoing political crisis in the Middle East continued to weigh on output expectations.

Also contributing to higher prices was Saudi Arabia’s plan to reduce crude exports in the near term. Reports said the kingdom plans to cut oil exports by 120,000 barrels per day in December.

Meanwhile, Saudi Arabia’s government recommended its citizens not to travel to Lebanon, while calling the international community to step up on further and stronger sanctions against Iran.

The rising tensions between Riyadh and Tehran followed Saudi Arabia Crown Prince Mohammed bin Salman’s accusation of “direct military aggression” to the Iranian government.

Earlier this week, the US Energy Information Administration reported that domestic crude in the United States jumped to all-time highs in the week ended November 3.

Crude oil supplies increased by 2.2 million barrels, against expectations for a 2.8 million barrels drop. Gasoline inventories fell by 3.3 million barrels, outperforming an initially estimated 1.9 million barrels. Distillate supplies were also down by 3.4 million barrels.

Ahead in the week, attention will be directed to Baker Hughes’ weekly oil rig count at 18:00 GMT.

Fort Financial Services