What’s next? – GOLD, OIL 09.02.18

GOLD

Gold futures were higher in Asia on Friday, as investors expect the Chinese New Year week will boost physical demand and as the People's Bank of China released almost 2 trillion yuan in extra liquidity following stable prices data.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.24 percent at $1.322.10 a troy ounce as of 07:10 GMT.

China’s consumer prices increased by 0.6%, compared to a 0.7% build seen month-over-month for January and at a 1.5% advance on yearly basis.

Producer prices notched up 4.3% year-over-year, meeting analysts’ expectations.

On Thursday, the precious metal settled near its lowest level in a month as the dollar continued to rise across the board on expectations of further monetary policy adjustments by the Fed.

The US regulator kept its monetary configuration steady last week, with the benchmark rate in a range between 1.25 and 1.50 percent. The bank said three rate hikes are likely in 2018.

The US dollar index, which measures the greenback against six major currencies, was trading 0.03 percent lower at 90.09 by the time of this writing.

The dollar-denominated metal is sensitive to changes in the US rates. Higher rates increase the opportunity cost of holding non-yielding assets, while boosting demand for the greenback.

Overnight, the metal was supported by a failed vote in Congress to approve a two-year budget that would add $300 billion in government spending. Republican Senator Rand Paul blocked the vote arguing increasing fiscal spending was heavily criticized by Republicans during Obama era.

“The real problem here is that Republicans have completely changed now and they said a trillion dollar deficit was terrible under Obama, but it’s just fine if it’s a Republican,” said Sen. Paul.

No relevant is due in the US session.

OIL

Oil prices were down in Asian hours on Friday, extending previous session losses as US production continued to rise and investors awaited a fresh reading on the weekly oil rig count.

The US West Texas Intermediate crude contracts were down 1.03 percent to $60.52 per barrel as of 07:10 GMT. Meanwhile, Brent futures drop 0.62 percent to $64.41 a barrel.

General Electric’s oilfield services firm Baker Hughes will release its weekly oil rig count at 18:00 GMT on Friday. Last week, the oil rig count stood at 765 units.

On Thursday, crude benchmarks came under pressure following the release of the official crude and refined products inventories by the US Energy Information Administration.

For the week ended February 2, the agency said crude stockpiles in the US rose 1.895 million barrels, less than the 3.189 million barrels build seen.

According to the EIA data, crude output in the US rose to 10.25 million barrels per day last week, bringing production close to major industry leaders such as Russia and Saudi Arabia.

Prices were also pressured by the restart of operations at the Forties pipeline in the North Sea.

The latest Commitment of Traders (COT) report showed that speculative net long position in crude oil increased by about 8,000 contracts to a net long 734,600 contracts last week.

<>

Fort Financial Services