What’s next? – GOLD, OIL 16.11.17

GOLD

Gold prices were higher Asian hours on Thursday with President Donald Trump’s tax reform bill issue driven sentiment to a negative side as prospect for an approval in 2017 seems cloudy.

On the Comex division of the New York Mercantile Exchange, gold futures were lower 0.05 percent to $1.277.10 a troy ounce as of 08:55 GMT.

The yellow metal settled in red territory on Wednesday as the dollar rebounded from intraday lows on signs that the US economy will keep growing consistently in the fourth quarter.

Expectations for growth boost probabilities for further Federal Reserve interest rate hikes later in the year. According to CME Group’s FedWatch tool, investors are pricing in nearly a 100 percent chance of a 25 basis points interest rate move in December.

The US consumer price index rose by 0.1 percent in October, against a 0.5 percent rise seen in the previous month. Growth level was in line with analysts’ expectations.

In other news, retail sales for October went up 0.2 percent, while economists had forecasted no changes. Sales had increased 1.9 percent in September.

Today, investors will keep an eye on various fronts, including UK retail sales for October at 09:30 GMT and EU’s CPI at 10:00 GMT.

In the United States, focus will be at export/import price indexes, initial jobless claims and the Philly Fed manufacturing index. All scheduled at 13:30 GMT. Later on, industrial production for October is due at 14:15 with a 0.5 percent gain eyed.

Gold is very reactive to changes in the US dollar and Treasury bond yields. A stronger greenback makes the metal more expensive for investors holding foreign currency.

Higher bond yields increase opportunities for traders in a broader scale of assets, pushing them out from the non-yielding precious metal.

OIL

Oil futures rebounded in Asian trading hours on Thursday as market participants saw a recent downward correction overdone and shifted to the falling output of OPEC-member Venezuela.

The US West Texas Intermediate crude contracts were up 0.20 percent to $55.44 per barrel as of 08:55 GMT. Brent futures were up 0.32 percent, to $62.07 a barrel.

Eurasia Group, the world's biggest political risk consultancy, reported that Venezuela’s state-owned PDVSA is extremely likely to declare default soon.

"Predicting the precise timing of a default is difficult, as the government seems prepared to keep paying while it can," Eurasia Group wrote in a report overnight.

On Wednesday, crude benchmarks settled in red territory as concerns over an increasing shale oil production in the United States continued to weigh on investors, while stockpiles in America showed a second consecutive weekly gain.

Crude inventories added 1.9 million barrels in the week ended November 10, compared to expectations for a 2.2 million barrels draw, the US Energy Information Administration said.

Data also showed gasoline supplies rising by 894,000 barrels against an estimated 919,000 barrels decline. Distillates were down by 799,000, missing a forecasted 1.3 million barrels drop.

These figures boosted speculation that the oil market will not be able to rebalance as soon as expected. Under this condition, attention has shifted once again to OPEC-led output cuts.

The oil cartel and a group of external producers led by Russia are set for a meeting on November 30 in Vienna to discuss a potential extensions of the production cuts agreement.

The current deal holds a deadline in March 2018. Saudi Arabia and Russia, the two most powerful oil producers worldwide have already expressed support for an extension.

Earlier this week, the Paris-based International Energy Agency downgraded its estimate for global demand for 2017 and 2018 by 100,000 barrels per day (bpd) to approximately 1.5 million bpd and 1.3 million bpd respectively.

No relevant data for this market is scheduled today.

Fort Financial Services