What’s next? – GOLD 22.02.18

GOLD

Gold prices were lower in early trading hours on Thursday, falling under pressure as the dollar continues its way and gets closer to a one-week high against major rivals.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.63 percent at $1.323.70 a troy ounce as of 07:30 GMT.

The dollar-denominated metal is sensitive to changes in the US currency. A stronger greenback makes the metal more expensive, less attractive for holders of foreign currencies.

The US dollar index, which measures the greenback against six major currencies, was trading 0.25 percent higher at 90.14 by the time of this writing.

The American currency was boosted by the latest monetary policy meeting minutes of the Federal Reserve, which were released in late trading hours on Wednesday.

The document solidified expectations that the US regulator is heading to a more aggressive stance on policy normalization, which means interest rates adjustments at a faster pace.

According to Fed funds tracked by CME Group’s FedWatch program, market participants are currently weighing an 85 percent probability of a 25 basis-point rate hike by March.

At the time, benchmark rates stand in a range between 1.25 and 1.50 percent. Federal Reserve policymakers have been mostly supportive of further hikes as labor market conditions continue to improve, as well as prospects for inflation.

Also contributing to the dollar’s strength were activity reports from the manufacturing and services sectors for February. The manufacturing PMI came in at 55.9, above 55.4 seen. The services PMI established at 55.9, outperforming an expected 53.8 reading.

Existing home sales for January came in at 5.38 million, down 3.2 percent. Analysts had estimated 5.61 million and a 0.9 percent build.

Ahead in the day, initial jobless claims are due as of 13:30 GMT. Traders will also be paying attention to a series of FOMC speakers, including Dudley at 15:00 GMT, Bostic at 17:10 GMT and Kaplan at 20:30 GMT.

OIL

Oil prices traded in red territory on Thursday, extending previous session losses as the dollar continues to rise across the board, getting close to a one-week high against major rivals.

The US dollar index, which measures the greenback against six major currencies, was trading 0.25 percent higher at 90.14 by the time of this writing.

Crude benchmarks are denominated in US dollars. A stronger greenback makes contracts more expensive for investors holding foreign currencies, dampening interest on the commodity.

The US West Texas Intermediate crude contracts were down 1.10 percent to $61.00 per barrel as of 07:30 GMT. Meanwhile, Brent futures eased 0.87 percent to $64.85 a barrel.

The dollar’s dynamic is currently one of the main factors weighing on energy prices. Its effect is so powerful that even an estimated reduction in crude supplies was not able to offer support.

Overnight, the American Petroleum Institute reported an unexpected drop in US crude stockpiles by 907,000 barrels for the week ended February 16 to 420.3 million barrels.

Market analysts are expecting US producers to increase their output in the near term, especially after Baker Hughes’ oil rig count showed last week an uptick of 51 rigs to 798.

Many investors feel worried about growing output in the US as it could threaten output cuts promoted by the Organization of the Petroleum Exporting Countries and Russia.

Ahead in the day, traders await official inventories by the US Energy Information Administration as of 16:00 GMT, with economists forecasting a 1.795 million-barrel build.

FortFS