What’s next? – GOLD, OIL 02.05.18

GOLD

Gold futures were up in early trading hours on Wednesday as market players prepared for a monetary policy statement and employment data later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.24 percent at $1.310.00 a troy ounce as of 9:40 GMT.

Gold prices settled right above year-to-date lows, as rise in US bond yields earlier this week continued to support the dollar across the board.

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 10-year Treasury bond yield held above a key resistance level at 3 percent. The dollar reached a four-month peak, changing its dynamic for the year from negative to positive.

Investors have opted for a moderate positioning in the first half of the week as the Federal Open Market Committee kicked off a two-day monetary policy meeting.

While no monetary changes are expected this month, market players will closely monitor for any hints on future plans for the economy. The rate decision is scheduled today at 18:00 GMT.

“The Fed is expected to reaffirm the Committee’s generally positive view of the economy and optimistic expectations for further growth and inflation in the near-term. The statement is, additionally, likely to reiterate the Committee’s intentions to continue to raise rates throughout 2018 at a ‘gradual’ pace,” Stifel Financial Corporation said in a note.

Dollar-denominated gold is sensitive to moves in US rates. A rising interest rate environment increases demand for the dollar, making gold more expensive for holders of foreign currency, while damping demand for the safe-haven asset.

On the data front, ADP nonfarm employment change for April will be out at 12:15 GMT.

OIL

Oil futures were higher in Wednesday trade, recovering from previous session's losses as market players prepared for fresh weekly data on US crude inventories scheduled later today.

The US West Texas Intermediate crude contracts rose 0.59 percent to $67.65 per barrel as of 10:30 GMT. Meanwhile, Brent futures were 0.26 percent lower at $73.32 a barrel.

The Energy Information Administration is expected to release its weekly report on oil stockpiles for the week ended April 27 as of 14:30 GMT, with a 739,000 barrels increase seen.

Analysts are also expecting a drop of 587,000 barrels for gasoline supplies and a 1.3 million barrels draw when it comes to distillate inventories.

In the prior session, the American Petroleum Institute said crude inventories in the United States rose 3.4 million barrels last week.

API’s report also showed a 1.6 million barrels growth in gasoline supplies, while inventories of distillates eased by 4.1 million barrels.

Oil traders continued to monitor geopolitical developments. President Donald Trump has until May 12 to decide whether to pull out of the 2015 nuclear deal with Iran.

If Iran - a major oil producer of the Organization of the Petroleum Exporting Countries - would again be affected by sanctions, oil prices are likely to pick up.

FortFS