What’s next? – GOLD, OIL 05.03.18

GOLD

Gold prices were up in Asian trading hours on Monday, with market players looking ahead to fresh employment data from the United States ahead in the week.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.29 percent at $1.327.20 a troy ounce as of 05:40 GMT.

The yellow metal ended last week in green territory, rebounding from its weakest point of the year as speculation surrounding the idea of a global trade war weighed on the dollar and boosted demand for safe haven assets such as gold.

Gold futures for April delivery rose about 1.42 percent to close at $1,323.70. For the week, quotes were down 0.52 percent, marking a second consecutive weekly reduction.

Last week, President Donald Trump announced a plan to impose tariffs on steel (25%) and aluminum (10%) imports, creating a wave of critics from China, the European Union, Mexico and even its close ally Canada. Some countries promised counter measures.

“We must show that we can also take measures. This cannot be a unilateral transatlantic action by the Americans, [...] we must take action. We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi’s,” said the European commission president Jean-Claude Juncker.

Voices were also heard from non-governmental organizations: “The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminium and steel,” the International Monetary Fund wrote in a statement.

The US dollar index, which measures the greenback against six major currencies, was trading 0.10 percent lower at 90.20 by the time of this writing.

A weaker greenback has a positive impact on the metal. As the dollar loses strength, the metal becomes cheaper for holders of foreign currencies, which tends to boost its demand.

In the coming days, market players will be paying attention to a fresh employment report by the US Labor Department on Friday, which could affect expectations for further rate hikes.

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.

OIL

Oil benchmarks were up in early trading hours on Monday, with investors awaiting for fresh inventory data in search for a clearer direction.

The US West Texas Intermediate crude contracts were up 0.38 percent to $61.48 per barrel as of 05:40 GMT. Meanwhile, Brent futures added 0.40 percent to $64.43 a barrel.

Crude benchmarks closed in green territory on Friday, although they posted weekly loses for the first time in nearly a month as fears of a rising US production weighed on sentiment.

Weekly WTI: -3.6 percent
Weekly Brent: -4.0 percent

Trade war rumors following President Donald Trump’s announcement over tariffs on steel and aluminium imports pushed benchmarks down, but later allowed them to correct upwards as the dollar became cheaper, boosting interest for commodities.

Oilfield services provider Baker Hughes said Friday the weekly oil rig count rose by one to 800, the highest level in the last three years, increasing speculation that US production will continue to build in the near time, possibly counteracting OPEC-led efforts.

Last week, the US Energy Information Administration said US domestic crude production increased to 10.3 million barrels per day for the week ended February 23, leaving the US really close to Russia and Saudi Arabia, the current world leaders by output.

The report also showed crude inventories adding 2.4 million barrels and gasoline supplies moving up by 2.483 million barrels, against expectations for a 190,000 barrels reduction. Distillate products went down by 960,000 barrels.

Apart from Wednesday’s official inventory data from the United States, traders will also keep an eye on the annual CERAWeek energy conference in Houston. OPEC representatives and US shale oil executives are expected to have a dinner together on Monday.

FortFS