What’s next? – GOLD, OIL 19.03.18

GOLD

Gold prices were lower in Asian hours on Monday, with Fed’s monetary announcement turning into the main focus for this trading week.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.02 percent at $1.312.00 a troy ounce as of 04:30 GMT.

The yellow metal settled at a two-week low on Friday, with the dollar extending gains as investors turned their eyes to the next Federal Reserve monetary policy meeting.

Gold futures for April delivery settled 0.27 percent lower at $1,314.20 last week. For the week, the precious metal notched down 0.88 percent.

Market participants are looking ahead to the next policy announcement on March 21, with a vast majority of bets on a 25 basis points rate hike. That move would leave the benchmark in a range between 1.50 percent and 1.75 percent.

According to Fed funds CME Group’s FedWatch program, market players are currently pricing in a nearly 94 percent chance of a rate adjustment next week. It would be the first hike of 2018.

A rising interest rate environment is negative for the metal as it dampens demand for non-yielding assets such as gold, while boosting the US dollar.

The US dollar index, which measures the greenback against six major currencies, was trading 0.09 percent lower at 89.88 by the time of this writing.

Apart from Fed’s monetary policy meeting, investors will also be looking at the G20 meeting in Argentina. Finance minister and central bank leaders from the world’s 20 top economies will be attending the meeting on Monday.

Meanwhile, Washington’s political drama remains on the spotlight. With a few top officials leaving the administration in the last few days, concerns over the future of domestic and international policies increased among market players.

OIL

Oil prices were higher in Asian trading hours on Monday, with traders looking ahead to upcoming inventory data later this week.

The US West Texas Intermediate crude contracts were down 0.53 percent to $62.08 per barrel as of 04:30 GMT. Meanwhile, Brent futures fell 0.57 percent to $65.83 a barrel.

Oil benchmarks settled in green territory on Friday, with increasing geopolitical tensions in the Middle East contributing to the upside movement. For the week, WTI crude futures ended 0.48 percent higher, while Brent contracts added 1.1 percent.

Crude quotes jumped on rising uncertainty over Iran’s nuclear deal, which allowed Tehran to increase oil production, following the sacking of US Secretary of State Rex Tillerson.

Tillerson has been replaced by Mike Pompeo, who has expressed support for President Donald Trump’s vision on the Iranian agreement.

On the sidelines of the matter, Saudi Arabia’s Crown Prince Mohammed bin Salman said his kingdom will develop nuclear weapons if Iran moves forward in that direction.

The US Energy Information Administration said in its latest report that crude stocks increased by 5.022 million barrels (mb) in the week ended March 9, surpassing a 2.023 mb build seen.

The report also exposed a drop in gasoline supplies - one of the products crude is transformed to - by 6.271 mb, against to expectations for a moderate decline of 1.176 mb.

Oilfield services company Baker Hughes said on Friday that the number of oil rigs operating in the United States grew by four, leaving the total count at 800.

In the upcoming week, market players will be focusing on fresh US inventory data on Tuesday and Wednesday and a new read on the US oil rig count by the end of the week. Geopolitical developments will also be monitored, especially in the US and Middle East.

FortFS