What’s next? – GOLD, OIL 29.01.18

GOLD

Gold prices were moderately lower in Asian trading hours on Monday, as a rebound of the US dollar pushed market participants to close their positions and take profits.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.44 percent at $1.346.10 a troy ounce as of 07:40 GMT.

Dollar-denominated gold is sensitive to variations in the dollar. A stronger greenback makes bullion more expensive for investors holding foreign currencies.

The US dollar index, which measures the greenback against six major currencies, was trading 0.16 percent higher at 89.03 by the time of this writing.

The American currency was supported by remarks from President Donald Trump insisting that under this administration the dollar will get “stronger and stronger”.

However, markets felt confused at first as US Treasury Secretary Steven Mnuchin has previously embraced a stronger currency, arguing a “weaker dollar is good for trade.”

The dollar continued its decline following the release of a downbeat fourth-quarter gross domestic product in the United States. According to data, the economy expanded by an annualized 2.6 percent, below an estimated 3 percent and a prior reading of 3.2 percent.

The Federal Reserve will hold its latest monetary policy meeting under Janet Yellen’s leadership on Tuesday. The event will be closely watched by investors, although no changes are expected.

On Friday, traders will be monitoring the release of employment figures by the US Department of Labor. The state of the labor market plays an important role in the policy decision.

The PCE price index and personal spending data for December are due at 13:30 GMT.

OIL

Oil futures were mixed in Asian hours on Monday, as the dollar remained in a weak position despite a moderate rebound in early trading and as traders await fresh data later this week.

The US West Texas Intermediate crude contracts were up 0.02 percent to $66.15 per barrel as of 07:40 GMT. Meanwhile, Brent futures declined 0.30 percent to $70.31 a barrel.

The US dollar index, which measures the greenback against six major currencies, was trading 0.16 percent higher at 89.03 by the time of this writing.

The dollar has played an important role in supporting oil prices in the last few weeks. Dollar-denominated crude becomes cheaper and therefore more attractive for investors holding foreign currencies when the greenback is weaker than its opponents.

Last week, crude benchmarks ended at their highest level since 2014 following unexpected reduction in US crude inventories and production levels.

Meanwhile, speculation grew that the Organization of the Petroleum Exporting Countries (OPEC) and Russia would continue to support the output cuts even after 2018.

Market analysts have warned that US shale oil producers might be ready to ramp up their production to take advantage of higher prices.

General Electric's Baker Hughes oilfield services company said on Friday the number of oil rigs operating in the United States rose by 12 to 759 in the week ended January 19. An increasing number of rigs anticipates higher production levels.

In other news, the CFTC said hedge funds and money managers increased their bullish bets on crude oil futures and options positions in New York and London by 7,612 contracts to 549,602.

Fort Financial Serivices