What’s next? – GOLD, OIL 03.05.18

GOLD

Gold futures were up in early trading hours on Thursday as market players digested Fed’s acknowledgement on inflation and prepared for fresh economic releases due later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.37 percent at $1.310.40 a troy ounce as of 6:50 GMT.

The yellow metal settled near session lows on Wednesday as demand for the dollar continued to grow while traders awaited for a widely anticipated Federal Reserve interest rate decision.

The US central bank decided to keep its benchmark rate steady in a range between 1.50 percent and 1.75 percent, although it reassured its commitment with monetary normalization.

Market participants estimate at least two more rate hikes this year. However, it is worth mentioning that chances for a fourth rate hike in December are close to 40 percent already.

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.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was unchanged at 92.34 by the time of this writing.

The dollar extended gains in the previous session as market players anticipated a hawkish position of the US regulator regarding interest rate adjustments for the near future.

Also contributing to a stronger greenback was the personal consumption expenditures (PCE) price index excluding food and energy, released earlier this week. The index increased 1.9 percent in the 12 months through March, very close to Fed’s 2 percent target.

On the data front, ADP nonfarm employment change for April came in at 204,000 jobs, surpassing a forecasted 200,000 reading.

Ahead in the US session, initial jobless claims, trade balance for March, nonfarm productivity and unit labor costs for the first quarter are all scheduled for release at 12:30 GMT.

The services and composite PMI will be published at 13:45 GMT. A few minutes later, durable goods orders, factory orders and the ISM non-manufacturing PMI await in the cue.

OIL

Oil futures were higher in Thursday trade, with investors digesting official inventory and production data from the US, while keeping an eye on the weekly oil rig count.

The US West Texas Intermediate crude contracts eased 0.12 percent to $67.85 per barrel as of 06:50 GMT. Meanwhile, Brent futures were 0.25 percent lower at $73.18 a barrel.

Oil benchmarks settled in green territory despite inventory data showing an increase in crude and gasoline stockpiles for the second-straight week.

According to the US Energy Information Administration, inventories of crude grew 6.218 million barrels for the week ended April 27, against an estimated build of 0.739 million barrels.

On the other hand, gasoline inventories jumped in 1.171 million barrels, while market analysts awaited a 0.587 million barrels decline. Distillate products dropped by 3.900 million barrels, beating a forecasted draw of 1.360 million barrels.

The report also showed US production extending its capacity to 10.6 million barrels per day, adding concerns over the future of the market and supply levels.

Despite this report, loses were capped by an ongoing geopolitical crisis in the Middle East. Expectations that the Trump administration would impose new sanctions against Iran are keeping sentiment on a positive note.

President Donald Trump has until May 12 to decide whether to pull out the US of the 2015 nuclear agreement signed with Iran.

FortFS