What’s next? – GOLD, OIL 25.04.18

GOLD

Gold futures traded lower in Asian hours on Wednesday, amid an empty economic front and as traders turn to the dollar’s dynamic in search for direction.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.59 percent at $1.325.10 a troy ounce as of 08:30 GMT.

The yellow metal settled in green territory on Tuesday, snapping a four-session losing streak as the rally in US treasury yields stopped, easing support for the dollar.

The US dollar index, which gauges the greenback against six major competitors, was trading 0.33 percent higher at 90.84 by the time of this writing.

The dollar-denominated metal is sensitive to moves in the greenback. A softer dollar makes the yellow metal more attractive for market participants holding foreign currencies.

The 10-year US treasury yield reached 3 percent, a level not seen since the beginnings of 2014. However, rates rebounded and moved back below the psychological level.

Higher bond yields can be interpreted as a vote of confidence in the economy. Usually, rising bond yields are accompanied by falling gold prices as demand for safe-havens decreases.

Analysts pointed out bond yields are reacting on expectations for further monetary policy normalization measures, particularly interest rate hikes scheduled later this year.

Gold gains were capped by an upbeat geopolitical context as positive developments were made over the US-China trade conflict. President Donald Trump emphasized that “China’s very serious, and we’re very serious,” adding that Treasury Secretary Steven Mnuchin will be part of delegation travelling to China. “We’ve got a very good chance at making a deal.”

On the data front, the Conference Board said consumer confidence for April came in at 128.7, surpassing expectations for 126.0 and a previous reading of 127.0. New home sales increased 4 percent in March to an annualized rate of 694,000 units. Also above analysts’ forecasts.

OIL

Oil futures were down in early trading hours on Wednesday, with market players looking ahead to official inventory data from the US Energy Department later in the day.

The US West Texas Intermediate crude contracts were down 0.09 percent to $67.64 per barrel as of 08:30 GMT. Meanwhile, Brent futures were 0.04 percent lower at $73.83 a barrel.

Crude benchmarks settled lower on Tuesday following hints that the US and France were close to reach an agreement to keep the Iran nuclear deal in place.

French President Emmanuel Macron proposed new terms that will keep Iran away from its nuclear activity until 2025, while putting an end to the country’s ballistic missile program.

News pushed some investors out of their long positions on crude as instability and expectations of output disruptions and cuts were keeping sentiment high in the last few sessions.

However, gains on crude were capped by rising expectations that the Organization of the Petroleum Exporting Countries will keep contributing to market rebalance in the near future.

In November 2016, OPEC and a group of non-OPEC producers led by Russia agreed to reduce output by 1.8 million barrels per day (bpd) to push down global inventories.

The US Energy Information Administration will publish its weekly report on crude and refined products as of 14:30 GMT. API and EIA reports can often differ.

FortFS