What’s next? – GOLD, OIL 25.05.18

GOLD

Gold futures eased in early trading hours on Friday as the dollar bounced despite downbeat geopolitical news and as traders awaited fresh reports later in the day.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.15 percent at 93.84 by the time of this writing.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.20 percent at $1,301.80 a troy ounce as of 6:15 GMT.

The yellow metal added more than 1 percent on Thursday as safe-haven spiked after President Donald Trump cancelled his meeting with North Korean leader Kim Jong Un.

However, the Republican leader said it was Pyongyang’s fault due to a constant inflammatory rhetoric against the United States. Trump also said the US military forces remained in standby.

"Sadly, based on the tremendous anger and open hostility displayed in your most recent statement, I feel it is inappropriate, at this time, to have the long-planned meeting," Trump said.

Investors quickly decided to leave behind risky investments in search for shelter, moving its money to the precious metal, which is seen as one of the favorite safe-havens out there.

Also, Federal Reserve minutes were not digested as positively as initially thought, lowering expectations for a fourth interest rate hike in 2018.

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

Ahead in today’s session, Germany’s business expectations, current assessment and lfo business climate for May are all to be released at 08:00 GMT. Analysts are forecasting 98.5, 105.5 and 102 respectively. Investors will get a look at the UK Q1 GDP half an hour later.

In the United States, focus will be at durable goods orders for April at 12:30 GMT. Federal Reserve Chair Powell will speak at 13:00 GMT, followed by FOMC Bostic and Kaplan at 15:45 GMT. Michigan’s consumer sentiment for May is up at 14:00 GMT.

OIL

Oil futures were lower in Asian hours on Friday after Russia hinted about a possible increase of crude production in the near future.

The US West Texas Intermediate crude contracts eased 0.10 percent to $70.64 per barrel as of 06:20 GMT. Meanwhile, Brent futures were down 0.19 percent at $78.64 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC countries led by Russia start reducing production levels in 2017 in order to boost oil prices.

The cartel and its allies agreed on target cuts of around 1.8 million barrels per day, a level that has not been modified since the original agreement.

Russian Energy Minister Alexander Novak said Thursday oil cuts could be eased “softly” if OPEC and non-OPEC nations understand the oil market finds balance by June.

The next OPEC + non-OPEC meeting will take place in Vienna on June 22.

From a fundamental view, any signs of halting or softening output cuts will considerably push oil prices to the downside. For such reason, the next meeting is a key event.

Oil prices have risen more than 20 percent in 2018, reaching levels not seen since 2014. Also, geopolitical tensions in Middle East have provided extra support.

Earlier this week, the US Energy Information Administration said crude supplies rose 5.8 million barrels in the week to May 18, against expectations for a 1.6 million barrels draw.

Ahead in today’s session, attention will be directed to Baker Hughes’ weekly rig count.

FortFS