What’s next? – GOLD, OIL 22.11.17

GOLD

Gold futures were down in early trading hours on Wednesday as markets prepared to receive a batch of economic reports from the United States.

On the Comex division of the New York Mercantile Exchange, gold futures were lower 0.12 percent to $1.280.10 a troy ounce as of 06:35 GMT.

The yellow metal settled higher on Tuesday as the dollar dropped amid falling long-term bond yields ahead of Federal Reserve's October meeting meetings.

Long-term treasury yields came under pressure, dragging the dollar to the downside, while boosting demand for safe-haven assets such as gold.

Investors are anxious about the release of October minutes in an intend to better assess the likelihood of a Fed interest rate hike at next month’s gathering.

According to Fed funds tracked by CME Group’s FedWatch tool, market participants are currently pricing in nearly a 100% probability of a rate hike by December.

Gold is very sensitive to changes in US benchmark rates. A higher rates environment tends to promote high-yielding assets, which is bad for the precious metal.

The US dollar index, which measures the greenback against a basket of six major rivals, was trading at 93.84, 0.04 percent to the downside by the time of this writing.

The metal also was supported by rising tension between the United States and North Korea. President Donald Trump added Pyongyang back to the list of sponsors of terrorism on Monday.

"Today the United States is designating North Korea as a state sponsor of terrorism. Should have happened a long time ago. Should have happened years ago," Trump said.

On the data front, existing home sales for October outperformed analysts’ forecast by showing a 2.0 percent monthly increase to a seasonally adjusted rate of 5.48 million units.

OIL

Oil futures were higher in early trading hours on Wednesday, with market participants awaiting official inventory data later in the day from the US Energy Department.

The US West Texas Intermediate crude contracts were up 1.50 percent to $57.68 per barrel as of 05:50 GMT. Brent futures were up 0.66 percent, to $62.98 a barrel.

Crude benchmarks settled in green territory on Tuesday as market players weighed chances of an extension of the output-cut deal against speculation for a higher US shale oil production.

Overnight, the American Petroleum Institute reported a 6.356 million barrels reduction in crude supplies for the week ended Nov 17, compared to a forecasted drop of 1.545 million barrels.

As for gasoline inventories, API showed a 869,000 barrels growth, which came in near an originally estimated build of 1 million barrels.

Oil prices were able to recover from Monday’s losses amid increasing expectations that the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC producers led by Russia will vote to extend output cuts by the end of the month in Vienna.

Earlier this year, OPEC members extended the agreement for a nine-month period after its original deadline in June but left unchanged the 1.8 million barrels per day reduction target.

Recent reports have suggested Russia may not be entirely sure to join the efforts, although President Vladimir Putin expressed support to the extension the last month.

Today, attention will be directed to official stockpiles from the US Energy Information Administration, which is scheduled for release as of 15:30 GMT.

Fort Financial Services