What’s next? – GOLD, OIL 08.12.17

GOLD

Gold futures were lower in early trading hours on Friday as investors turned to official labor data scheduled for release later in the day in the US session.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.17 percent at $1.251.90 a troy ounce as of 06:50 GMT.

The yellow metal settled to the downside on Thursday near four-month lows as the dollar continued to gain on the back of rising optimism over the long-awaited US tax reform.

The US dollar index, which measures the greenback against six major currencies, was trading at 93.86 by the time of this writing, up 0.10 percent.

Gold extended losses for a third consecutive session as market participants are increasing their bets on a potential tax reform bill meant to reduce tax pressure for individuals and corporations.

According to the Trump administration, cutting taxes will allow citizens to have more cash in their pockets, boosting consumption and inflation, and also attract companies to relocate profits.

Also supporting the greenback were reports on a deal between Senate and House Republicans to pass a bill that would allow to skip a government shutdown in the upcoming days.

The US Labor Department said initial jobless claims stood at 236,000 last week, below an estimated 240,000 and a previous week 238,000.

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.

Fed funds tracked by CME Group’s FedWatch tool show participants weighing in a nearly 100 percent chance of a 25 basis points rate hike at the December 13 monetary meeting.

Ahead in today’s session, focus will be at fresh labor market data, including the unemployment rate, average hourly earnings and most importantly, nonfarm payrolls for November.

OIL

Oil futures were slightly lower in early trading hours on Friday, as market participants turned their attention to the weekly oil rig count, which is due later in the day.

Oilfield services firm Baker Hughes will release its weekly oil rig count as of 18:00 GMT. Last week, it reported a raise by 2 rigs to a total count of 749 units, the highest level since Sept.

The US West Texas Intermediate crude contracts were down 0.09 percent to $56.64 per barrel as of 06:50 GMT. Meanwhile, Brent futures eased 0.05 percent to $62.17 a barrel.

Sentiment in the oil market continued to be influenced by the same factors: OPEC-led output cuts and speculation on a larger US shale oil production.

Earlier this week, the Energy Information Agency (EIA) said crude stockpiles fell by 5.6 million barrels in the week ended December 2, more than a forecasted 3.4 million barrels drop.

The agency also said gasoline supplies added 6.8 million barrels, above an estimated 1.7 million barrels build. Distillate products grew 1.7 million barrels vs a 967,000-barrel draw seen.

Previously, the American Petroleum Institute had said crude inventories dropped by 5.481 million barrels last week.

Last week, OPEC and its allies agreed to extend its output cuts agreement beyond March 2018 for a nine-month period, with a steady reduction target of 1.8 million barrels per day.

Despite this deal has already supported growth of oil benchmarks in the past few months, traders are moderately skeptical about its ability to counteract rising supply levels.

Fort Financial Services