What’s next? – GOLD, OIL 16.02.18

GOLD

Gold futures were lower in early trading hours on Friday, with expectations on monetary changes setting the tone for the dollar.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.41 percent at $1.360.80 a troy ounce as of 06:50 GMT.

The yellow metal ended flat on Thursday as trading activity was restricted amid rising doubts about inflationary pressure and future monetary policy adjustments by the Federal Reserve.

Inflation and labor market conditions are two of the most important benchmarks for Fed policymakers when deciding about future monetary changes.

The US regulator left unchanged its benchmark rate in a range between 1.25 and 1.50 percent, while insisting that at least three rate hikes could take place during 2018.

The Labor Department said its producer price index rose 0.4 percent in January following a 0.1 percent decline in December. In the twelve months through January, the PPI added 2.2 percent.

A higher inflation anticipates future monetary changes, boosting speculation for rate hikes in the near term, which provides bullish for the American currency.

The US dollar index, which measures the greenback against six major currencies, was trading 0.31 percent lower at 88.23 by the time of this writing.

The dollar-denominated metal is sensitive to changes in the US currency. A weaker greenback makes the metal more attractive for investors holding foreign currencies.

Ahead in the day, focus will be directed to real estate market data. Building permits for January and housing starts are up at 13:30 GMT. Later on, Michigan University will release its consumer expectations and consumer sentiment gauges for February at 15:00 GMT.

OIL

Crude oil prices were higher in early Asian hours on Friday, with market players looking ahead to the weekly oil rig count and keeping an eye on the dollar’s dynamic.

The US West Texas Intermediate crude contracts were up 0.54 percent to $61.50 per barrel as of 06:50 GMT. Meanwhile, Brent futures added 0.47 percent to $64.63 a barrel.

Crude benchmarks settled to the downside as market participants continued to digest supportive remarks from Saudi Arabia Oil Minister Al-Falih on the future market conditions.

"If we have to overbalance the market a little bit, then so be it," said Al-Falih.

The Organization of the Petroleum Exporting Countries and a group of independent producers led by Russia agreed to extend output cuts by 1.8 million barrels per day until the end of 2018.

However, both parts have been showing constant support to a potential extension in case it is required to prevent oversupply to take over again and push prices down.

Sentiment remained positive, but oil prices gave up some previous session gains as excitement over the latest crude and refined products inventories data.

Earlier this week, the US Energy Information Administration said crude supplies rose 1.841 million barrels in the week ended Feb 9, compared to a 2.825 million barrels build seen.

The agency also said refinery utilization eased to 89.8 percent last week, as the industry entered a period of maintenance, which is expected to last nearly one month.

The US dollar index, which measures the greenback against six major currencies, was trading 0.21 percent lower at 88.82 by the time of this writing.

Ahead in the day, Baker Hughes’ weekly oil rig count is due for release as of 18:00 GMT.

FortFS