What’s next? – GOLD, OIL 21.02.18

GOLD

Gold futures were lower in early trading hours on Tuesday, extending previous session losses as the dollar continued to strengthen against major competitors.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.20 percent at $1.328.50 a troy ounce as of 08:20 GMT.

The yellow metal dropped sharply in late trading hours on Tuesday amid a rapid strengthening of the US dollar and bond yields as players looked ahead to the latest Fed minutes.

The US dollar index, which measures the greenback against six major currencies, was trading 0.17 percent higher at 89.79 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.

The Federal Open Market Committee will unveil minutes from its latest monetary policy meeting on Wednesday as of 19:00 GMT. In the document, a hawkish rhetoric on further rate hikes is widely expected following numerous evidences of strong market labor conditions and inflation.

While the FOMC estimated three rate hikes for 2018, some policymakers and analysts have recently mentioned a potential fourth increase depending on inflationary developments.

In other news, the upcoming release of over $250 billion of US debt set for later this week has been weighing on Treasury bonds, boosting yields and sending bullion prices to the downside.

On the data front, market players will keep an eye on manufacturing and services PMI indexes for February as of 14:45 GMT. Existing home sales for January are due at 15:00 GMT.

OIL

Crude oil prices were down in early trading hours on Wednesday, as the dollar continued to recover its positions against major rivals across the board.

The US West Texas Intermediate crude contracts were down 1.04 percent to $61.15 per barrel as of 08:30 GMT. Meanwhile, Brent futures eased 0.89 percent to $64.67 a barrel.

A stronger dollar makes crude prices more expensive for investors holding foreign currencies, dampening interest on the commodity.

The US dollar index, which measures the greenback against six major currencies, was trading 0.17 percent higher at 89.79 by the time of this writing.

If the dollar continues to rise in the next few days, we could expect an extended reduction on crude quotes, despite ongoing support by OPEC-led efforts to cut production levels.

In the last few months, we’ve seen crude benchmarks growing consistently following the decision to extend OPEC + Russia output cuts until the end of 2018.

Ahead in the day, the American Petroleum Institute will release its crude and refined products stockpiles estimates for the week ended Friday 16 at 21:30 GMT.

Contributing to support oil prices were Saudi Arabia’s decision to boost production cuts a little more by cutting exports to below 7 million barrels per day next month.

Meanwhile, geopolitical tensions in the Middle East, especially between Israel and Iran due to conflicts in the Syria border, were also supporting sentiment for benchmarks.

Last week, Baker Hughes said on Friday the weekly oil rig count has increased by 51 to 798.

FortFS