What’s next? – GOLD, OIL 30.01.18

GOLD

Gold prices were down in Asian trading hours on Tuesday, as the US dollar continued to recover against major rivals, putting commodities under pressure.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.10 percent at $1.338.90 a troy ounce as of 07:30 GMT.

The yellow metal dropped on Monday in the light of a sharp jump in the dollar as investors continued to build expectations on a promising economic growth rate and inflation.

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 0.22 percent higher at 89.33 by the time of this writing.

On the data front, the core PCE price index for December, one of Fed’s favorite inflation readings, came in line with forecast at a monthly rate of 0.2 percent and a yearly 1.5 percent.

In other news, personal spending for December was up 0.4 percent from the prior month, but still short from an initially estimated 0.5 percent and a previous 0.8 percent.

Those factors would push the Federal Open Market Committee to move forward with the anticipated three rate hikes planned for 2018, or even more depending on market conditions.

The Federal Reserve will hold its latest monetary policy meeting under Janet Yellen’s leadership on Tuesday. The event will be closely monitored, but no changes are seen so far.

Investment bank Goldman Sachs says the central bank is likely to take a more hawkish stance once Jerome Powells takes over, increasing chances of monetary policy adjustments.

According to the latest Commitment of Traders report, money managers and hedge funds have risen their gross long positions in Comex gold futures by 8,630 contracts to 236,003.

OIL

Oil futures were down in Asian hours on Tuesday, as the dollar extended gains overnight.

The US West Texas Intermediate crude contracts were down 1.02 percent to $64.89 per barrel as of 07:30 GMT. Meanwhile, Brent futures declined 0.72 percent to $68.96 a barrel.

Crude benchmarks settled to the downside on Monday as the dollar rebounded in late hours, recovering some ground against major rivals while fears that US output would counteract OPEC-efforts to cap oil supply in the global market.

The US dollar index, which measures the greenback against six major currencies, was trading 0.22 percent higher at 89.33 by the time of this writing.

Dollar-denominated crude becomes cheaper and therefore more attractive for investors holding foreign currencies when the greenback is weaker than its opponents.

Last week, Baker Hughes said the number of oil rigs operating in the US rose by 12 to 759 in the week ended January 19. More rigs pumping oil anticipates higher production levels.

According to the US Energy Information Administration, the United States is close to producing 10 million barrels per day, a level that would put the country ahead of Russia and Saudi Arabia.

Analysts believe crude production in the US will continue to rise as shale producers are eager to take advantage of higher prices, although that would put benchmarks again under pressure.

Ahead in today’s session, traders will be looking at weekly crude and refined products stockpiles by the American Petroleum Institute.

Fort Financial Services