What’s next? – GOLD, OIL 16.03.18

GOLD

Gold prices were lower in Asian hours on Friday, with market players preparing for a new batch of economic reports later in the session.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.06 percent at $1.317.00 a troy ounce as of 06:10 GMT.

The yellow metal settled sharply lower on Thursday, with the dollar recovering its strength as attention shifted to next Federal Reserve’s monetary policy meeting next week.

Investors will be carefully monitoring the next policy announcement on March 21, with most bets placed a 25 basis points rate hike that would take the benchmark rate to 1.50-1.75 percent.

According to Fed funds CME Group’s FedWatch program, market players are currently pricing in a nearly 90 percent chance of a rate adjustment next week. It would be the first hike of 2018.

The latest economic data released in the United States haven’t been supportive for further monetary adjustments, especially the consumer price index for February. However, analysts have pointed out these reports are unlikely to change policymakers’ minds over the issue.

Also contributing to the downside move on gold prices were easing concerns over a potential trade war between the United States and China.

The US dollar index, which measures the greenback against six major currencies, was trading 0.05 percent lower at 89.64 by the time of this writing.

A stronger greenback has a negative impact on the metal. As the dollar gains strength, the metal becomes more expensive for holders of foreign currencies, which dampens its demand.

On the data front, initial jobless claims notched down to 226,000 against an estimated 230,000 reading. The NY Empire State manufacturing index for March surpassed expectations at 22.50.

In other news, Philly Fed manufacturing index for March fell short on expectations at 22.3 vs a forecasted 23.2 reading. The import price index for February rose 0.4 percent.

Ahead in the day, building permits for February and housing starts are due at 12:30 GMT. Industrial production figures are scheduled at 13:15 GMT. JOLTs job openings will be released as of 14:00 GMT, along with Michigan University’s consumer sentiment and expectations.

OIL

Oil prices were higher in Asian trading hours on Friday, with a fresh look at the weekly oil rig count awaited by participants amid an improving market sentiment.

The US West Texas Intermediate crude contracts were up 0.20 percent to $61.31 per barrel as of 06:10 GMT. Meanwhile, Brent futures rose 0.05 percent to $65.15 a barrel.

Crude benchmarks settled in green territory after the International Energy Agency said that oil demand could surpass supply despite the increasing US shale oil production.

“With supply from Venezuela clearly vulnerable to an accelerated decline, without any compensatory change from other producers, it is possible that the Latin American country could be the final element that tips the market decisively into deficit,” the IEA wrote in its report.

The IEA upgraded its forecast of global oil demand growth for 2018 by 90,000 barrels a day to 1.5 million barrels per day on speculation that OECD nations will continue to produce more.

News arrived only a day after the Organization for the Petroleum Exporting Countries (OPEC) increased its growth forecast for non-OPEC output in 2018 by 280,000 barrels a day to 1.66 million bpd, pushing benchmarks to the downside.

Earlier this week, the US Energy Information Administration said crude stocks rose by 5.022 million barrels (mb) in the week ended March 9, above expectations for a 2.023 mb build.

The report also showed stockpiles of gasoline - one of the products crude is transformed to - falling by 6.271 mb, compared to expectations for a moderate decline of 1.176 mb.

Ahead in the day, investors will be looking at Baker Hughes’ oil rig count as of 18:00 GMT.

FortFS