What’s next? – OIL, GOLD 01.02.18

GOLD

Gold prices were higher in Asian trading hours on Wednesday, with market participants Fed’s monetary policy announcement and preparing for fresh data later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.05 percent at $1.342.40 a troy ounce as of 07:50 GMT.

The yellow metal settled lower on Wednesday, reverting early gains as the dollar recovered against major rivals in anticipation of the Federal Reserve’s monetary policy announcement.

As it was widely expected among investors, the US regulator opted to keep interest rates steady at a range between 1.25 and 1.50 percent, reassuring its position to move forward with at least three interest rate hikes in 2018.

Despite the fact no policy changes were expected, traders closely monitored the event as it was Janet Yellen’s last meeting as head of the central bank.

The dollar-denominated metal is sensitive to changes in US rates. Higher interest rates lift the opportunity cost of holding non-yielding assets such as the precious metal, while promoting demand for its base currency, making it more expensive for foreign currency holders.

The US dollar index, which measures the greenback against six major currencies, was trading 0.16 percent higher at 89.10 by the time of this writing.

Treasury bonds were also on the watch as 10-year yields remained close to 3 percent, a level that could potentially attract more investors but weight on equity markets.

On the data front, ADP said nonfarm employment increased by 234,000, above an estimated 186,000 jobs addition. The employment cost index came in line with forecast at 0.6 percent.

Ahead in today’s session, Markit Economics’ manufacturing PMI is due for release at 14:45 GMT. The Institute for Supply Management will publish its manufacturing PMI for Jan as of 15:00 GMT.

OIL

Oil futures were down in Asian hours on Thursday, despite a build in US crude inventories and production levels.

The US West Texas Intermediate crude contracts were down 0.05 percent to $64.70 per barrel as of 07:50 GMT. Meanwhile, Brent futures declined 0.04 percent to $68.86 a barrel.

Crude benchmarks settled in green territory despite data showing US crude inventories added for the first time in 11 weeks and the daily output was over 10 million barrels per day last week.

The US Energy Information Administration said on Wednesday crude stockpiles added 6.776 million barrels for the week ended January 26, above an estimated draw of 308,000 barrels.

On the other hand, gasoline supplies went down by 1.980 million barrels against a 1.877 million barrels build seen. Distillate products unexpectedly fell by 1.940 million barrels.

Previously, the American Petroleum Institute had estimated a build of 3.23 million barrels for the week ended January 26. The institution also reported an alleged increase in gasoline supplies by 2.69 million barrels and a drop in distillates by 4.1 million barrels.

EIA data also showed US crude production at its highest level since November 1970 at 10.04 million bpd. The US is now closer to world top producers such as Russia or Saudi Arabia.

Despite that factor might put crude prices under pressure in the near term, the Organization of the Petroleum Exporting Countries and Russia remain fully committed to the so-called production cuts agreement.

Ahead in the week, focus will be at a fresh weekly oil rig count by Baker Hughes due on Friday.

Fort Financial Services