What’s next? – GOLD, OIL 27.03.18

GOLD

Gold prices were lower in Asian hours on Tuesday, with data shifting to fresh economic reports scheduled ahead in the American session.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.16 percent at $1.352.80 a troy ounce as of 06:50 GMT.

The yellow metal rose to a more than six-week peak as the dollar extended to the downside despite easing worries about the prospect of a trade war between the US and China.

The US dollar index, which measures the greenback against six major currencies, was trading 0.10 percent higher at 88.69 by the time of this writing.

According to US news outlets, the US and China have started a process of negotiation to water down the discussion of import tariffs that could potentially damage both sides.

China has allegedly taken into consideration a US request to reduce tariffs on US cars, a boost on purchases of semiconductors and a greater freedom for American financial companies to operate in the Asian country.

“As for the risk of a broader trade dispute, we think the odds here remain low as well, [...] Europe has been exempted much like the President exempted Canada and Mexico from the steel and aluminium tariffs a few weeks ago," Morgan Stanley wrote in a note to clients.

In today’s session, the S&P/CS HPI Composite - 20 n.s.a. for January is due for release as of 13:00 GMT, with a forecasted year-over-year rate of 6.1 percent.

The Conference Board will present its consumer confidence indicator for March at 14:00 GMT, with 130.0 points eyed. No relevant news were released on Monday.

OIL

Crude oil prices were higher on Tuesday early trading hours, supported by rising concerns that tensions in the Middle East could impact on oil production levels.

The US West Texas Intermediate crude contracts were up 0.44 percent to $65.84 per barrel as of 06:50 GMT. Meanwhile, Brent futures added 0.27 percent to $70.31 a barrel.

The possibility that the Trump administration will move forward with a series of sanctions against Iran, limiting Tehran’s ability to sell crude in international markets lifted prices.

Also contributing to the upward momentum were Saudi Arabia remarks over a potential OPEC+Russia extension of output cuts in 2019. Iraq has already shown support for the idea.

American production has already risen by almost a 25 percent since mid-2016, to 10.4 million barrels per day (bpd), moving above Saudi Arabia and keeping a short distance from Russia.

Supporting crude markets were also hopes that China and the United States will solve their differences and avoid a trade war that could potentially damage both economies.

Ahead in the day, traders await the release of crude inventory estimates by the American Petroleum Institute as of 20:30 GMT.

Last week, the US Energy Information Administration reported a reduction of 2.6 million barrels for the week ended March 2.6, compared to an estimated 2.6 million barrels gain.

FortFS