What’s next? – GOLD, OIL 02.02.18

GOLD

Gold prices were higher in Asian trading hours on Friday, despite the dollar moving higher on expectations for an upbeat employment report later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.31 percent at $1.352.10 a troy ounce as of 07:50 GMT.

The yellow metal traded in red territory on Thursday amid a strengthening US dollar across the board, but losses were capped by expectations that the downward correction might continue.

The American currency was supported by upbeat economic data from the United States. Initial jobless claims fell by 1,000 to 230,000 in the week ending January 27. Analysts had estimated an increase to 238,000 last week.

The dollar began its recovery following the Federal Reserve monetary policy announcement, in which the US regulator reinforced its confidence on future economic growth and inflation.

The Federal Open Market Committee opted to keep interest rates steady in a range between 1.25 and 1.50 percent. The central bank has anticipated three interest rate hikes in 2018.

The US dollar index, which measures the greenback against six major currencies, was trading 0.05 percent higher at 88.55 by the time of this writing.

The dollar-denominated metal is sensitive to changes in the dollar. A stronger base currency makes the precious metal more expensive for investors and therefore, reduces its demand.

Ahead in the day, focus will be at the release of employment data by the US Labor Department as of 13:30 GMT, which includes nonfarm payrolls, the unemployment rate and average hourly earnings.

Earlier this week, ADP reported a rise in nonfarm employment by 234,000, above an estimated 186,000 jobs addition. The employment cost index stood in line with a forecasted 0.6 percent.

Also, attention will be directed to factory orders and Michigan University’s consumer expectations and sentiment for January at 15:00 GMT.

OIL

Oil futures were up in Asian hours on Friday, with market players awaiting a fresh look at the weekly oil rig count later in the session.

The US West Texas Intermediate crude contracts were up 0.59 percent to $66.19 per barrel as of 07:50 GMT. Meanwhile, Brent futures rose 0.40 percent to $69.93 a barrel.

Crude benchmarks settled higher on Thursday, as market players continued to digest a major drop in US gasoline and distillate stockpiles, while members of the Organization of the Petroleum Exporting Countries and Russia reassured their commitment with output cuts.

On Wednesday, the US Energy Information Administration said crude supplies went up in the week ended January 27 by 6.8 million barrels, the first build seen in 11 weeks.

The agency also said crude production ticked up by 41,000 barrels per day to 9.919 million bpd, dangerously close to the 10 million bpd mark forecasted by the Paris-based International Energy Agency weeks before. The current production levels haven’t been seen since early 1970s.

Despite analysts believe lower prices will push US shale oil producers to continue rising their production capability to benefit from them, which would put benchmarks again under pressure.

Ahead in the day, attention will be directed to the weekly oil rig count as of 18:00 GMT.

Fort Financial Services