What’s next? – GOLD, OIL 23.05.18

GOLD

Gold futures traded without a clear direction on Wednesday, with the dollar easing in early hours but remaining close to Monday’s high.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.10 percent at $1.290.70 a troy ounce as of 6:55 GMT.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.05 percent at 93.58 by the time of this writing.

The dollar-denominated metal is sensitive to moves in the US dollar. A stronger greenback makes gold less attractive for holders of foreign currency, reducing demand for safe-havens.

The American currency remains on a positive track and it is likely the 94 mark will soon be tested. On Monday, the dollar extended gainst up to 93.62, the highest level in months.

US 10-year Treasury bond yields were also close to 3 percent on expectations the Federal Open Market Committee will continue to adjust its monetary policy in the near future.

On Thursday, the Federal Reserve will present minutes of the latest monetary encounter and investors will be paying close attention to the rhetoric used by FOMC members.

On the news front, President Donald Trump said he was not satisfied with the achievements of trade negotiations with China representatives in Washington.

Also, Trump said there is “a very substantial chance” the meeting with North Korean Leader Kim Jong Un “won’t work out”. His remarks came after a meeting with South Korean President Moon Jae-in.

“I don’t want to waste a lot of time and I’m sure he doesn’t want to waste a lot of time. So there’s a very substantial chance it won’t work out and that’s OK. That doesn’t mean it won’t work out over a period of time.”

Ahead in the day, Markit Economics is expected to present preliminary manufacturing and services activity data at 13:45 GMT. New home sales for April are next at 14:00 GMT.

Also, the Energy Department will unveil official crude inventories half and hour later. Minutes of the latest FOMC monetary policy meeting will be out at 18:00 GMT.

OIL

Oil prices were down on Wednesday early trading hours, as investors weighed in the possibility of higher output levels by the Organization of the Petroleum Exporting Countries.

The US West Texas Intermediate crude contracts eased 0.35 percent to $71.95 per barrel as of 07:30 GMT. Meanwhile, Brent futures were down 0.54 percent at $79.14 a barrel.

Market analysts are suggesting that OPEC may decide to increase production as soon as June as Iran and Venezuela output levels would soon come under more pressure due to US sanctions.

Iran is the third largest OPEC producer and currently produces 4 percent of global oil. Earlier this week, the US demanded Iran dropping its nuclear program and pulling out of the Syria war in order not to impose new sanctions.

Meanwhile, Venezuela’s production is down 1.5 million barrels from last month to its lowest level in years as the country’s economic crisis is getting worse each day. The US is also considering sanctions against Venezuela’s government for anti constitutional practices.

Ahead in today’s session, investors will be monitoring official crude and refined products stockpiles by the Energy Information Administration as of 14:30 GMT.

FortFS