What’s next? – GOLD, OIL 06.12.17

GOLD

Gold futures were higher in early hours on Wednesday as market players looked ahead to unofficial employment data later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.32 percent at $1.269.20 a troy ounce as of 05:35 GMT.

On Tuesday, the yellow metal traded in red territory as the recent green light to a major US tax reform bill continued to support the American currency across the board.

Gold futures were down about 0.21 percent at $1,275.10 per ounce as of 12:40 GMT.

The dollar recovered following the approval of Republican-drafted tax reform bill by the Senate, which is meant to reduce taxes and therefore, boost economic growth and inflation levels.

Those factors would push the Federal Reserve to increase interest rates at a faster pace, and maybe even consider ramping up the plan to unwind the regulator’s massive balance sheet.

Reports released in the last few days are suggesting a joint resolution between the Senate and the House of Representatives will be ready before Christmas.

The US dollar index, which gauges the American currency against six major rivals, was trading at 93.18 by the time of this writing, down 0.16 percent.

Dollar-denominated gold is sensitive to interest rate moves. A stronger base currency makes the metal more expensive and less competitive for investors holding other currencies.

Ahead in today’s session, German factory orders for October are up at 07:00 GMT, with a 0.3 percent decline seen. In the United States, focus will be directed to the ADP nonfarm employment change for November, a report that anticipates official NFP on Friday.

OIL

Oil futures were lower in Asian trading hours on Wednesday, with market players digesting inventory estimates and preparing for official data later in the day.

The US West Texas Intermediate crude contracts were down 0.38 percent to $57.40 per barrel as of 06:05 GMT. Meanwhile, Brent futures down 0.37 percent to $62.63 a barrel.

Crude benchmarks were mixed on Tuesday as support from the OPEC-led output cuts agreement extension eased and concerns over rising US shale oil production weighed.

Overnight, the American Petroleum Institute said crude inventories dropped by 5.481 million barrels last week, above an estimated decline of 4.1 million barrels.

Ahead in today’s session, investors will be focusing on the release of crude and refined products stockpiles figures by the US Energy Information Administration.

Last week, oilfield services provider Baker Hughes reported a raise in the total oil rig count to 749 units, the highest level since September.

According to recent EIA data, shale oil production in the US has grown nearly 15 percent since a bottom in mid-16 and increasing rigs preview even further advances.

Investors doubt that OPEC and its allies will be able to counteract increasing US production and continue to support prices. Last week, output cuts were extended for nine-months until the end of 2018, although the target reduction remained at 1.8 million barrels a day (bpd).

Fort Financial Services