What’s next? – GOLD, OIL 19.01.18

GOLD

Gold futures were higher in Asian hours on Friday, with market players looking ahead to further economic reports in search for data support.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.38 percent at $1.332.30 a troy ounce as of 06:50 GMT.

The yellow metal was down by the end of Thursday’s session as US yields increased sharply following solid growth data from China and with investors expecting inflation to accelerate soon.

US 10-year Treasury yields moved to a ten-month peak in the light of a better-than-expected Chinese economic growth. The gross domestic product for the fourth quarter came in at an annualized rate of 6.8 percent, above an estimated 6.7 percent.

Gold is very sensitive to changes in US rates, which elevate the opportunity cost of holding non-yielding assets such as the precious metal.

Bank Macquarie issued a warning on Thursday about a potential reversal in gold prices. According to the financial institution, the support zone for bullion is located between $1,320 and $1,325 per ounce, where new buyers might come into play.

The US dollar index, which measures the greenback against six major currencies, was trading 0.11 percent lower at 90.20 by the time of this writing.

On the data front, building permits came in at a 1.302 million units rate, above an initially forecasted 1.290 million units. Housing starts were down by 8.2 percent in December to a rate of 1.192 million. Initial jobless claims notched down more than expected to 220,000.

A recent report by the Commitment of Traders (COT) showed that speculative net long positions in gold have increased by 40,000 contracts to a six-week peak of 203,300.

OIL

Crude futures were notably lower in early trading hours on Friday, with market participants continuing to digest official crude inventories from the United States.

The US West Texas Intermediate crude contracts were down 1.28 percent to $63.07 per barrel as of 07:00 GMT. Meanwhile, Brent futures eased 1.02 percent to $68.60 a barrel.

Oil prices settled in red territory on Thursday as a report by the US Energy Information Administration showed a sharp recovery of production levels.

According to government data, US production increased by 258,000 barrels per day (bpd) to 9.75 million barrels per day in the week ended January 12. Analysts are expecting US output to rise above 10 million barrels per day in the next few weeks.

As for inventories, the agency said crude reserves dropped by 6.86 million barrels last week, more than an estimated reduction of 3.54 million barrels.

Meanwhile, gasoline showed a 3.62 million barrels build, above a 3.43 million barrels increase seen. On the other hand, distillates, a category that includes diesel and heating oil, unexpectedly went down by 3.89 million barrels, against expectations for a 86,000 barrels build.

In other news, the Organization for the Petroleum Exporting Countries released its monthly report about the state of the oil market. According to data, total non-OPEC is expected to reach 58.8 million bpd in 2018, while global demand to increase up to 1.5 million bpd.

Ahead in today’s session, General Electric’s company Baker Hughes will unveil its weekly rig count as of 18:00 GMT.

Fort Financial Services