What’s next? – GOLD, OIL 20.03.18

GOLD

Gold prices were lower in Asian hours on Tuesday, as all eyes turn to the next monetary policy meeting and the dollar’s dynamic.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.18 percent at $1.315.40 a troy ounce as of 04:50 GMT.

The yellow metal settled in green territory on Monday despite expectations that the Federal Reserve will raise interest rates by 25 basis points later this week.

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

The US dollar index, which measures the greenback against six major currencies, was trading 0.19 percent higher at 89.50 by the time of this writing.

The greenback came under pressure in the first week of this trading week as the political scene in the United States remains mixed following last week’s sacking of Secretary of State Tillerson.

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

Stock investment company Stifel said on Monday that “the Federal Reserve is likely to reiterate a data-dependent stance and an expectation for ‘gradual’ movements in the removal of accommodation amid still lingering skepticism among some policymakers as to the direction of the underlying economy and inflation.”

No relevant economic data is scheduled on Tuesday.

OIL

Oil prices were higher in Asian trading hours on Tuesday, with traders awaiting fresh inventory estimates later in the day.

The US West Texas Intermediate crude contracts were up 0.37 percent to $62.36 per barrel as of 04:50 GMT. Meanwhile, Brent futures rose 0.33 percent to $66.27 a barrel.

Crude benchmarks were lower in late hours on Monday as concerns over a potential increase of US oil production continued to weigh on sentiment.

Also contributing to the negative sentiment was Saudi Arabia’s build in its shipments of diesel and gasoline. The Kingdom added nearly 27 percent to a record 1.912 million barrels a day in January, the Joint Organisations Data Initiative reported.

The Organization of the Petroleum Exporting Countries and Russia signed an agreement last year to extend output cuts until the end of 2018. Capping oil production supports oil prices.

General Electric’s company Baker Hughes reported last Friday that the number of oil rigs operating in the United States rose by four to 800.

Last week, the US Energy Information Administration said crude production in the United States rose to 10.38 million barrels per day, which surpasses OPEC’s de-facto leader Saudi Arabia.

Ahead in today’s session, traders will be focusing on the release of fresh crude inventory estimates by the American Petroleum Institute as of 20:30 GMT.

FortFS