What’s next? – GOLD, OIL 29.05.18

GOLD

Gold prices were lower on Tuesday in Asian hours, as interest on risk assets continued to recover despite Italy’s political turmoil.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.45 percent at $1,297.80 a troy ounce as of 6:00 GMT.

The yellow metal extended loses on Monday, moving below the $1,300 mark amid a weaker safe haven demand as geopolitical tensions continued to ease.

Appetite for safe-haven assets such as gold was decrease after US President Donald Trump said on Sunday that a US team had arrived to North Korea to ultimate details for a summit between him and North Korean leader Kim Jong Un.

However, losses for the metal were capped by Italy’s appointment of a new Prime Minister. President Sergio Mattarella blocked the nomination of a eurosceptic finance minister.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.16 percent at 94.29 by the time of this writing.

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.

No economic news were released on Monday. Volatility and trading volumes remained below average as US and UK markets were shut for holidays.

OIL

Crude oil prices were mixed on Tuesday early trading hours, with concerns that Saudi Arabia and Russia would increase production in the near still weighing on sentiment.

The US West Texas Intermediate crude contracts dropped 1.71 percent to $66.73 per barrel as of 07:00 GMT. Meanwhile, Brent futures were up 0.28 percent at $75.51 a barrel.

Market participants are pricing in the possibility that Saudi Arabia and Russia will soon begin to raise oil production to keep the oil market balanced.

However, no decisions are expected to be announced before June 22, when the representatives from the Organization of the Petroleum Exporting Countries and other external producers will gather in Vienna.

Sources said Saudi Arabia and Russia have already discussed a potential increase of 1 million barrels per day in supply for the second-half of the year to counteract shortages from Venezuela and Iran.

OPEC and Russia are both heavily oil-depending economies, but pushing prices too high would again reactivate a large set of shale producers in the US, which threatens to weigh on prices such as it happened back in 2015.

Last week, General Electric’s Baker Hughes rig count increased by 15 units to a total count of 859 rigs, the highest level since March 2015.

FortFS