What’s next? – GOLD, OIL 27.02.18

GOLD

Gold prices were higher in Asian hours on Tuesday, amid a weaker dollar and as traders prepared for a widely anticipated speech by the new Fed’s chief.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.16 percent at $1.334.90 a troy ounce as of 05:50 GMT.

The precious metal settled in green territory on Monday, as investors were cautious on the dollar ahead of Federal Reserve Chair Jerome Powell’s testimony before Congress on Tuesday.

The US dollar index, which measures the greenback against six major currencies, was trading 0.09 percent lower at 89.71 by the time of this writing.

Also weighing on the dollar were 10-year bond yields, which continued to drop from a four-year high of 2.957 percent. The data front was not supportive neither, with new home sales showing a 7.8 percent reduction in January to a rate of 593,000.

The dollar-denominated metal is sensitive to changes in the US currency. A weaker greenback makes the metal less expensive for holders of foreign currencies.

Last week, the yellow metal notched down after the latest monetary policy meeting minutes by the Federal Reserve showed policymakers see inflation and economic growth improving soon.

Those two elements are expected to justify further monetary policy changes as part of the policy normalization plan of the US regulator, especially regarding interest rates.

According to Fed funds tracked by CME Group’s FedWatch program, market participants are currently weighing an 85 percent probability of a 25 basis-point rate hike by March.

Ahead in the day, attention will be directed to durable goods orders for January at 13:30 GMT, along with the goods trade balance and CB consumer confidence gauge at 15:00 GMT.

OIL

Oil benchmarks were up in early trading hours on Tuesday, with market players awaiting fresh inventory data from the American Petroleum Institute later in the day.

The US West Texas Intermediate crude contracts were down 0.11 percent to $63.84 per barrel as of 05:50 GMT. Meanwhile, Brent futures eased 0.07 percent to $67.45 a barrel.

Crude benchmarks retreated in late trading hours on Monday but remained close to two-week highs, supported by Saudi Arabia’s plan to extend output cuts.

Saudi oil minister Khalid al-Falih said the kingdom’s oil production in January-March would be below average, with exports cutting down to about 7 million barrels per day.

Falih also said OPEC and its allies remain committed to bringing stability to the oil market and that he expected it would be possible to reduce output curbs next year.

"A study is taking place and once we know exactly what balancing the market will entail we will announce what is the next step. The next step may be easing of the production constraints, [...] My estimation is that it will happen sometime in 2019".

The Organization of the Petroleum Exporting Countries (OPEC) and a group of independent producers led by Russia agreed in December to keep oil output cuts running throughout 2018.

Crude prices were also boosted by last week’s inventory figures by the US Energy Information Administration, which reported a drop of 1.6m barrels against a 1.8m barrels build seen.

Last week, Baker Hughes said the total oil rig count rose by one to a 799 units.

FortFS