What’s next? – GOLD, OIL 30.04.18

GOLD

Gold futures were down in Asian hours on Monday as the dollar extended gains on the back of US Treasury bond yields, which came back below the three percent mark.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.40 percent at $1.318.10 a troy ounce as of 8:55 GMT.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was 0.12 percent higher at 91.45 by the time of this writing.

The American currency is holding above the 91 level since last Friday’s drop in US 10-year bond yields to about 2.957 percent from a multiyear peak of 3.035 percent.

Dollar-denominated gold is sensitive to moves in the dollar. A stronger dollar makes gold more expensive for holders of foreign currency, damping demand for the safe-haven asset.

Developments in the Korean peninsula also contributed to a downtrend in the metal. Leaders of North Korea and South Korea agreed to work on peace efforts following a historic summit.

Now investors are turning their heads to the next monetary policy meeting of the Federal Reserve, which takes places later this week.

The US central bank rose interest rates in March by 25 basis points to a range between 1.50 percent and 1.75 percent. The Federal Reserve forecasts two more hikes this year.

No changes are expected this month, and market players will likely focus on remarks and hints over the regulator’s future plans for the economy.

Ahead in today’s session, market players will be focusing on the core PCE price index at 12:30 GMT. This is Fed’s favourite inflation measure and investors are hoping to see a 1.9 percent advance against a previous month 1.6 percent growth. Personal spending will also be released by that time. Pending home sales for March are up at 14:00 GMT.

OIL

Oil futures were down in early trading hours on Monday, with market participants weighing geopolitical tension in the Middle East while looking forward to fresh inventory data in the US.

The US West Texas Intermediate crude contracts dropped 1.13 percent to $67.33 per barrel as of 09:00 GMT. Meanwhile, Brent futures were 2.30 percent higher at $72.92 a barrel.

Investors are currently speculating on a potential renewal of economic sanctions against Iran - a major member of the Organisation of the Petroleum Exporting Countries. If the Trump administration moves forward with sanctions, Iran’s crude production would feel the pain, which is positive for prices.

OPEC and Russia agreed last year to extend output cuts until the end of 2018. In recent weeks, several officials have referred to the possibility of extending the deal further on if the United States would continue to ramp up its crude production levels.

Last week, the US Energy Information Administration said crude inventories rose in 2.170 million barrels for the week ended April 20, compared to expectations for a 1.6 million barrels draw.

The agency also reported an increase in gasoline stockpiles, which added 0.840 million barrels, against a forecasted drop of 0.625 million barrels. Distillate products fell 2.611 million barrels, while analysts awaited a 0.861 million barrels reduction.

Not once, the oil cartel expressed full commitment to support all efforts contributing to market rebalance. Excess in supply have pressured prices for a few years, taking quotes down below acceptable levels for many OPEC and non-OPEC nations.

General Electric’s company Baker Hughes’ reported an addition of five oil rigs in the United States last week, leaving the total oil rig count at 825 units - the highest level since March 2015.

At the moment, domestic production stands at 10.59 million barrels per day.

In the week ahead, traders will be focusing on inventory data (Tuesday and Wednesday) and a rest reading on the oil rig count (Thursday).

FortFS