What’s next? – GOLD, OIL 31.01.18

GOLD

Gold prices were higher in Asian trading hours on Wednesday, with market participants awaiting for fresh economic data and Fed’s monetary policy announcement.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.46 percent at $1.346.10 a troy ounce as of 07:30 GMT.

The yellow metal settled in red territory on Tuesday as American bond yields continued to increase amid rising speculation over a solid economic growth and a better inflationary environment that could push the Federal Reserve to hike rates at a faster pace this year.

The Federal Reserve kicked off its two-day monetary on Tuesday, with the monetary policy announcement scheduled on Wednesday at 19:00 GMT. According to market analysts, US policymakers will opt to keep things steady until Jerome Powell officially becomes Chairman.

Dollar-denominated gold is sensitive to variations in US rates. Higher interest rates lift the opportunity cost of holding non-yielding assets such as the precious metal, while promoting demand for its base currency, making it more expensive for foreign currency holders.

The US dollar index, which measures the greenback against six major currencies, was trading 0.21 percent lower at 88.81 by the time of this writing.

Overnight, investors also kept an eye on President Donald Trump’s State of the Union address, which was basically centered in three things: commerce, immigration and national security.

On the data front, the Conference Board said its consumer confidence measure grew to 125.4 in January from 122.1 in December, above analysts’ expectation for a 123.1 reading.

Ahead in the day, ADP nonfarm employment for January will be release at 13:15 GMT, with economists anticipating a 191,000 jobs creation. The employment cost index for the fourth-quarter will be available fifteen minutes later. Pending home sales for Dec are due for publishing at 15:00 GMT, with a 0.5 percent build seen.

OIL

Oil futures were down in Asian hours on Wednesday, with official crude inventories in focus.

The US West Texas Intermediate crude contracts were down 0.59 percent to $64.12 per barrel as of 07:30 GMT. Meanwhile, Brent futures declined 1.19 percent to $68.20 a barrel.

Crude benchmarks were lower on Tuesday as investors have decided to get rid of some their bullish positions amid rising concerns that a higher US production would push prices down.

Oilfield services firm Baker Hughes said last week that the number of oil rigs searching for oil in the US rose by 12 to 759 in the week ended January 19.

The weekly oil rig count is used to gauge future supply levels. Analysts warned that US shale producers will try to take advantage of high energy prices by ramping up output levels.

Recently, the Paris-based International Energy Agency also explained that the US is getting really close to the 10-million-barrel-per-day milestone. The US Energy Information Administration reported a production volume of 9.88 million barrels per day last week.

Despite speculation over this matter, the commitment of the Organization of the Petroleum Exporting Countries and Russia over the production cuts agreement remains intact. Both parts have expressed full support to the measures.

The dollar is another factor weighing on benchmarks. A stronger dollar makes commodities more expensive for foreign currency holders.

The US dollar index, which measures the greenback against six major currencies, was trading 0.21 percent lower at 88.81 by the time of this writing.

The American Petroleum Institute said overnight crude inventories in the US rose by 3.23 million barrels for the week ended January 26. Gasoline supplies also increased 2.69 million barrels, while distillates eased by 4.1 million barrels.

Ahead in the day, crude and refined products stockpiles by the EIA will be out by 15:30 GMT.

Fort Financial Services