What’s next? – GOLD, OIL 28.02.18

GOLD

Gold prices were near breakeven in Asian trading hours on Wednesday, with market participants looking ahead to fresh economic data later in the session.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.02 percent at $1.318.80 a troy ounce as of 06:30 GMT.

The yellow metal ended on Tuesday sharply lower amid a strong upward correction of Treasury bond yields and the dollar following remarks by Federal Reserve chair Jerome Powell.

Powell, who testified for the first time before Congress as head of the Federal Reserve, said he has noticed increasing inflationary pressure since December.

“We’ve seen some data that will in my case add some confidence to my view that inflation is moving up to target, [...] We’ve also seen continued strength around the globe, and we’ve seen fiscal policy become more stimulative.”

His comments boosted expectations for further monetary policy changes later this year. The US regulator has anticipated at least three rate hikes in 2018.

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.

The US dollar index, which measures the greenback against six major currencies, was trading 0.09 percent higher at 90.37 by the time of this writing.

On the wake of the event, the American currency soared to a three-week peak, while the benchmark 10-year bond yields rebound from local lows about three percent.

On the data front, durable goods orders notched down 3.7 percent in January, more than an estimated drop of 2.4 percent. The goods trade deficit expanded to $74.4 billion from a prior $71.58 billion. February’s CB consumer confidence came in above expectations at 130.8.

Ahead in the day, investors will be looking at a revision of the fourth-quarter gross domestic product as of 13:30 GMT. Pending home sales for January will be released at 15:00 GMT.

OIL

Oil benchmarks were down in early trading hours on Wednesday, as market participants prepared for official inventory data later in the session.

The US West Texas Intermediate crude contracts were down 0.60 percent to $62.63 per barrel as of 06:30 GMT. Meanwhile, Brent futures eased 0.63 percent to $66.21 a barrel.

Crude benchmarks settled in red territory on Tuesday after the International Energy Agency (IEA) said that the fast pace of US production may extend beyond 2018.

"US shale growth is very strong, the pace is very strong ... The United States will become the #1 oil producer sometime very soon," IEA Director Fatih Birol told Reuters.

These remarks renewed fears that the United States output will counteract efforts made by the Organization of the Petroleum Exporting Countries and a group of independent producers led by Russia to rebalance and stabilize the oil market.

OPEC and Russia agreed to extend output cuts until the end of 2018, despite some voices have already expressed the possible need to put a break to them to avoid disbalances.

Saudi Arabian oil minister Khalid al-Falih said on Monday his nation is fully committed with the deal, along with all parts involved, and anticipated further reductions in exports.

Also contributing to the down move were expectations that US crude and refined products inventories by the Energy Information Administration, which are set for release on Wednesday, will expose a rise in domestic stockpiles.

The American currency strengthened in late trading hours on Tuesday following a speech by Federal Reserve chair Jerome Powell before Congress.

Powell, who testified for the first time before Congress as head of the Federal Reserve, said he has noticed increasing inflationary pressure since December.

His comments boosted expectations for further monetary policy changes later this year. The US regulator has anticipated at least three rate hikes in 2018.

FortFS