What’s next? – GOLD, OIL 07.03.18

GOLD

Gold prices were down in Asian trading hours on Wednesday as market players looking ahead of private-sourced employment data later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures fell 0.07 percent at $1.334.30 a troy ounce as of 07:35 GMT.

The yellow metal increased sharply on Tuesday as the dollar moved to the downside in the light of ongoing fears over the prospect of a global trade war between the United States and key commercial allies such as the European Union, China and Canada.

Also contributing to higher gold prices were news that President Donald Trump’s economic advisor Gary Cohn stepped down as the Republican leader moved forward with his plan.

Bloomberg News suggested President Trump knew Cohn will quit if the administration imposes tariffs on steel and aluminium.

Earlier this week, Trump announced an increase of import tariffs on steel and aluminium of 25 percent and 10 percent respectively. Trump says the decision would help employment.

US Treasury Secretary Steven Mnuchin expressed his support for the tariffs, but he clarified there is no intention to start a trade war across the globe.

"We're not looking to get into trade wars. We're looking to make sure that U.S. companies can compete fairly around the world," Mnuchin said.

Meanwhile, easing geopolitical tension from the Korean peninsula capped gains for the metal. Reports showed Kim Jong-un’s Pyongyang might be ready to denuclearisation should the continuation of his regime be guaranteed.

"North Korea made clear its willingness to denuclearize the Korean peninsula and the fact there is no reason for it to have a nuclear programme if military threats against the North are resolved and its regime is secure," North Korean delegation head Chung Eui-yong told journalists.

The US dollar index, which measures the greenback against six major currencies, was trading 0.12 percent lower at 89.48 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 boosts its demand.

OIL

Oil benchmarks were down in early trading hours on Wednesday, as investors prepared for official inventory data later in US hours.

The US West Texas Intermediate crude contracts were down 0.81 percent to $62.09 per barrel as of 07:35 GMT. Meanwhile, Brent futures dropped 0.87 percent to $65.22 a barrel.

Crude benchmarks settled in green territory amid rising expectations that the Energy Information Administration’s weekly inventory data will outline a build in US crude supplies.

While US refiners remain in a period of seasonal maintenance, refinery activity continues to be lower than the usual, which adds to the prospect of an increase in near-term supplies.

Market players are forecasting a 2.7 million barrels build in crude stockpiles for the week ended March 2. The Energy Information Administration (EIA) will release its report on Wednesday.

Contributing to the negative sentiment were expectations that the US shale oil production will continue to grow in the short run. In its prior report, the EIA said crude output was at 10.3 million barrels per day, which puts the US very close from Russia and Saudi Arabia.

“The United States is set to put its stamp on global oil markets for the next five years,” said IEA executive director Fatih Birol said in a statement.

Ahead in the week, investors will keep an eye on Baker Hughes’ oil rig count, due for release on Friday as of 18:00 GMT. Last week, the oilfield services company said the weekly oil rig count rose by one to 800, the highest point in the last three years.

FortFS