What’s next? – GOLD, OIL 23.03.18

GOLD

Gold prices were higher in Asian hours on Friday, with market players preparing for a fresh batch of economic releases later in the day, while the US dollar remains on the spotlight.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.87 percent at $1.338.90 a troy ounce as of 06:30 GMT.

The yellow metal moved away from two-week highs as the American currency recovered some positions after bouncing in the way of a widely expected interest rate hike on Wednesday.

Earlier this week, the US Federal Reserve increased its benchmark rate by 25 basis points to a range between 1.50 percent and 1.75 percent.

The US dollar index, which measures the greenback against six major currencies, was trading 0.24 percent lower at 89.16 by the time of this writing.

On Thursday, President Donald Trump announced tariffs on nearly $50 billion worth of Chinese exports invoking Section 301 of the 1974 Trade Act. The Trump administration considers China is violating multiple terms on US intellectual property.

Investors are concerned that the decision would increase tension between the world’s two biggest economies and potentially derivate in a massive trade war.

Meanwhile, BNP Paribas said it continues to expect a fourth interest rate hike this year.

“With the median dot holding at three hikes for this year by the tiniest of margin, for us the balance of risk is clearly weighted towards the FOMC bringing forward its rate path expectations,” wrote BNP Paribas.

On the data front, initial jobless claims rose to 229,000 from an estimated 225,000. Preliminary readings on manufacturing and services PMIs came below expectations at 55.7 and 54.1.

Ahead in the session, durable goods orders for February will be out at 12:30 GMT. New home sales for February are expected to be published at 14:00 GMT.

OIL

Oil prices were higher in Asian trading hours on Friday, with market players awaiting the weekly US oil rig count later in the session.

The US West Texas Intermediate crude contracts were up 0.93 percent to $64.90 per barrel as of 06:30 GMT. Meanwhile, Brent futures rose 0.74 percent to $69.42 a barrel.

Baker Hughes is expected to release its weekly oil rig count for the US as of 18:00 GMT.

Crude benchmarks settled lower on Thursday as most investors opted to take profits following strong gains this week, although sentiment remained on the green side, opening the doors to a potential short-term upward correction.

Morgan Stanley said US crude inventories are expected to fall later in 2018 if geopolitical tensions in the Middle East continue to grow.

“On May 12, the US government will need to decide on the renewal of the waiver of Iranian sanctions,” the bank said.” “Depending on the outcome, this could affect Iranian exports, including possibly taking a few hundred thousand barrels per day off the market.”

Also, the investment bank said crude prices could benefit from Venezuela’s output shortage.

“Any restrictions imposed by the US government on diluent exports from the US or crude imports from Venezuela into the US could lead to a further decline in overall production.”

Earlier this week, the US Energy Information Administration said that crude stockpiles for the week ended March 16 dropped by 2.6 million barrels vs a forecasted gain of 2.6 million barrels.

FortFS