What’s next? – GOLD, OIL 05.02.18

GOLD

Gold prices were lower in Asian trading hours on Monday, with the recovery of the dollar weighing on commodities all across the board.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.25 percent at $1.334.00 a troy ounce as of 06:50 GMT.

The precious metal settled in red territory on Friday as the greenback recovered against major rivals following upbeat labor market data which boosted speculation for more rate hikes.

Gold futures for April delivery were down by nearly one percent at $1,335.70 in late trading hours on the Comex division of the New York Mercantile Exchange.

Bullion prices have been facing increasing pressure after hitting a local high on January 26 as the American currency and benchmark Treasury yields have regained ground.

The US Labor Department said on Friday the economy added 200,000 jobs in January, outperforming analysts’ estimation. Average hourly earnings were up 2.9 percent.

Labor market conditions, along with inflation, are carefully monitored by US policymakers in order to justify further monetary policy adjustments. The closest the economy gets to full employment, the likeliest the Federal Reserve will continue to raise interest rates in the future.

Last week, the Federal Open Market Committee opted to keep interest rates in a range between 1.25 and 1.50 percent, while reassuring its three-rate-hike projection for 2018.

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.

The US dollar index, which measures the greenback against six major currencies, was trading 0.03 percent higher at 89.06 by the time of this writing.

Ahead in today’s session, traders will be paying attention to the release of Markit’s composite and services PMIs for January in the US as of 14:45 GMT, as well as ISM non-manufacturing PMI scheduled fifteen minutes later.

OIL

Oil futures traded lower in Asian hours on Monday, with a strengthening dollar weighing on commodity prices, while fears of an increasing US production remained latent.

The US West Texas Intermediate crude contracts were down 0.84 percent to $64.90 per barrel as of 06:35 GMT. Meanwhile, Brent futures dropped 0.90 percent to $67.96 a barrel.

As the American currency corrected upwards, many traders opted to sell their long positions and fix their profits. The Brent is now trading close to a one-month low.

The dollar found support on upbeat labor market data last Friday. The US Labor Department said on Friday the economy added 200,000 jobs in January, outperforming analysts’ estimation. Average hourly earnings were up 2.9 percent.

Labor market conditions, along with inflation, are carefully monitored by US policymakers in order to justify further monetary policy adjustments. The closest the economy gets to full employment, the likeliest the Federal Reserve will continue to raise interest rates in the future.

The US dollar index, which measures the greenback against six major currencies, was trading 0.03 percent higher at 89.06 by the time of this writing.

Crude prices are denominated in US dollars, making them very sensitive to changes in the rate. A stronger currency makes oil more expensive for investors holding foreign money.

Last week, the US Energy Information Administration said crude production rose above 10 million barrels per day, a level not seen since 1970, as shale oil producers intend to take advantage of high quotes.

On Friday, Baker Hughes said the weekly oil rig count added six units in the week ended February 2 to push the total to 765 rigs.

Fort Financial Serviecs