What’s next? – GOLD, OIL 07.05.18

GOLD

Gold futures were trading moderately higher in early hours on Monday, with the dollar’s dynamic taking a major role in the safe-haven asset direction.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.03 percent at $1.315.10 a troy ounce as of 6:50 GMT.

The yellow metal was able to close slightly higher on Friday, but remained under pressure due to an ongoing strengthening of the US dollar.

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

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.07 percent at 92.48 by the time of this writing.

Ahead this week, investors will be looking ahead to updates on US producer price and consumer price indexes on Wednesday and Thursday, respectively.

Inflation is a key benchmark for the Federal Open Market Committee and its proper development is crucial for the future of monetary policy.

On the data front, the Labor Department said nonfarm payrolls for April missed expectations at 164,000 jobs, against an expected job creation of 189,000. Average hourly earnings were also below forecast with a modest increase of 0.1 percent.

This report had little impact on monetary policy expectation. Most traders believe the Federal Reserve will remain on its path of normalization, which is clearly a positive thing for the dollar.

OIL

Oil futures were higher in Asian hours on Monday, as market participants expected further supply reductions in Venezuela and Iran on the back of geopolitical tensions.

WTI crude prices crossed above $70 a barrel today for the first time since November 2014, while Brent futures reached fresh highs, amid a deepening economic crisis in Venezuela that could push the country's oil supplies even lower.

The US West Texas Intermediate crude contracts rose 0.87 percent to $70.33 per barrel as of 06:50 GMT. Meanwhile, Brent futures were 0.95 percent higher at $75.58 a barrel.

Ahead this week, investors will continue to focus on the US-Iran dispute over the nuclear deal. The Trump administration has until May 12 to decide whether to pull out of the 2015 international agreement and restore sanctions against Tehran.

Reinstating sanctions could easily contribute to higher oil prices as crude production in Iran would likely be under pressure, shaving global output levels even more.

Over the weekend, President Hassan Rouhani said Iran - a major producer of the Organization of the Petroleum Exporting Countries - remained ready to respond to any move by President Donald Trump, warning the US would regret exiting the deal.

General Electric's Baker Hughes energy services company said the US rig count rose by nine in the week to May 4, bringing the total count to 834, the highest figure since March 2015.

FortFS