What’s next? – GOLD, OIL 24.04.18

GOLD

Gold futures were lower in Asian hours on Tuesday, with market players keeping an eye on geopolitics while awaiting for fresh economic reports.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.98 percent at $1.325.20 a troy ounce as of 07:20 GMT.

The yellow metal came under pressure on Monday as geopolitical tensions continued to ease and dollar strengthened further on the back of the increasing US bond yields.

The benchmark 10-Year US Treasury yield moved closer to three percent in the previous session, boosting demand for the greenback, which traded near to an eight-week high.

The US dollar index, which gauges the greenback against six major competitors, was trading 0.63 percent higher at 90.64 by the time of this writing.

Dollar-denominated gold is very sensitive to moves in the greenback. A stronger dollar makes the yellow metal more expensive for market players holding foreign currencies.

Market players also observed the US-China trade conflict, in which there hasn’t been major developments, rising expectations that both nations will find a peaceful solution.

The news front was also nurtured by prospects of positive talks between US President Donald Trump and the North Korean leader Kim Jong-un scheduled for this upcoming weekend.

Pyongyang has suspended their nuclear and ballistic missile tests until the meeting between leaders is concluded. Investors are hoping for a positive outcome, which could weigh on gold.

On the data front, the US manufacturing and services PMIs for April outperformed expectations at 56.5 and 54.4 respectively. Existing home sales grew 1.1 percent in March to 5.6 million units.

Ahead in today’s session, the S&P/CS HPI composite for February is up at 13:00 GMT, followed by CB consumer confidence for April and new home sales for March at 14:00 GMT.

OIL

Oil futures were mixed in early trading hours on Tuesday as participants prepared for fresh crude and refined inventories estimates later in the session.

The US West Texas Intermediate crude contracts were down 0.32 percent to $68.18 per barrel as of 07:20 GMT. Meanwhile, Brent futures were 0.19 percent higher at $74.20 a barrel.

Crude benchmarks settled in green territory on Monday as market players weighed comments from Iran over a potential extension of OPEC-led output cuts agreement.

Iran's oil minister Bijan Zanganeh said if oil prices continue to rise there will be no need to extend production cuts in the future.

"If the current oil price hike trend continues, there will be no necessity for extension of the OPEC agreement," Zanganeh said. "High oil price, even in the mid-term, works against OPEC interest by imposing volatility on the market and pressure on the price," he added.

Zanganeh also confirmed that Iran was exporting nearly 2.5 million barrels per day, which represents a 30 percent rise from March, according to news agency Bloomberg.

Market players are currently waiting the US to impose a fresh batch of sanctions against Iran for allegedly breaking terms of the multilateral nuclear agreement signed back in 2015.

“New Iranian sanctions in May would likely be the catalyst needed to encourage long-term buyers to revisit US E&P’s in a more serious way and could lead to materially higher oil prices, erase the backwardation in crude and provide a path for prices to stay elevated for quite some time,” explained Energy Specialist Leo Mariani.

Ahead in the day, traders will be looking at inventory estimates from the American Petroleum Institute for the week ended April 20.

FortFS