What’s next? – GOLD, OIL 13.11.17

GOLD

Gold prices were higher in Asian trade on Monday as market participants looked ahead of key economic reports later in the week, including inflation data in the United States.

On the Comex division of the New York Mercantile Exchange, gold futures were higher 0.23 percent to $1.277.10 a troy ounce as of 07:10 GMT.

The yellow metal ended sharply lower on Friday as an unclear large-scale short order weighed and pushed bullion prices almost a percent down.

In general terms, last week was good for gold, with geopolitical tensions in the Middle East and Asia boosting demand for safe-haven assets.

The dollar also went down in the previous session on fears that the Republican Senate will block tax reductions for the corporate sector until 2019.

Traders believe the tax cuts could boost economic growth, leaving no option to the Federal Reserve than rising faster interest rates to cope with inflation.

On weekly basis, the US dollar felt 0.61 percent against its main rivals. By the time of this writing, the US dollar index traded at 94.43, 0.16 percent higher.

Gold tends to perform best when the dollar goes down as it makes the metal more affordable for market participants holding foreign currencies.

Michigan University’s consumer expectations and sentiment indicators for November were both below forecasted values at 87.6 and 97.8 respectively.

In the days to come, inflation readings around the world will keep traders busy. CPI data is scheduled in the US, the UK and the Eurozone.

Ahead today, traders will keep an eye on remarks from Bank of Japan Governor Kuroda as of 17:45 GMT and the release of the US Federal Budget for October at 19:00 GMT.

OIL

Oil prices were slightly higher in Asian trading hours on Monday as geopolitical tensions in the Middle East continued to support the commodity.

The US West Texas Intermediate crude contracts were up 0.09 percent to $56.79 per barrel as of 07:10 GMT. Brent futures were up 0.05 percent, to $63.55 a barrel.

Crude benchmarks settled slightly lower on Friday, with market sentiment falling under pressure after the weekly oil rig count showed an unexpected growth.

Oilfield services provider Baker Hughes said the number of rigs drilling for oil in the United States increased by nine to 738 units in the week ended November 10.

The oil rig count is used to estimate future production levels in the country. According to the latest figures, shale oil producers seem to be ramping up their output levels, which could turn to be a potential negative factor for crude prices.

Oil prices are currently holding near 28-month highs backed on expectations that the Organization of the Petroleum Exporting Countries and a group of ten independent producers will agree to extend output cuts later this month.

OPEC and the Russia-led group are expected to meet on November 30 in Vienna to discuss the potential pact extension. The current deal expires in March 2018.

Crude quotes have also received support from the Middle East, where geopolitical tension is running high after an Iranian born missile was launched against Saudi Arabia, the world’s largest oil exporter and second biggest producer.

Over the weekend, Riad said it was increasing security at its oil pipelines after Bahrain accuses Iran for trying to destroy a pipeline that connects both Arab countries.

"[The] attempt to bomb the Saudi-Bahraini oil pipeline is a dangerous Iranian escalation that aims to scare citizens and hurt the global oil industry," Foreign Minister Khalid Al-Khalifa said.

In the week ahead, market players will focus on fresh weekly crude and refined products stockpiles data from the US on Tuesday and Wednesday, as well as monthly reports from OPEC and the Paris-based International Energy Agency.

Fort Financial Services