What’s next? – GOLD, OIL 30.05.18

GOLD

Gold futures were trading higher on Wednesday as market participants digested the possibility of fresh elections in Italy next autumn.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.25 percent at $1,302.30 a troy ounce as of 7:40 GMT.

Market participants fear that another Italian election, which could take place as soon as August, would serve as an opportunity for anti-establishment parties to set themselves in power.

Gold - one of the most popular safe-haven assets - tends to perform well in periods of high uncertainty and instability as investors look for options to safeguard their money.

The political turmoil in Italy also weighed on the euro, allowing the dollar to reach a 10-month high against it. EU exporters, however, favored from a cheap euro, which makes their products more competitive abroad.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was down 0.13 percent at 94.67 by the time of this writing.

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

The dollar is also supported by news that a summit between President Donald Trump and North Korean leader Kim Jong Un is back on track.

Ahead in today’s session, traders will be monitoring the following releases: Germany’s unemployment change and rate at 08:00 GMT, followed by the latest reading on consumer prices.

In the US, attention will be directed to ADP nonfarm employment change for May at 12:15 GMT. A fresh reading on the Q1 GDP is due fifteen minutes later, along with the goods trade balance for April. The Federal Reserve will unveil its Beige Book at 18:00 GMT.

Later on, Japan’s industrial production figures for April are due at 23:50 GMT.

OIL

Oil futures were down in early trading hours on Wednesday as market participants continued to weigh a potential reduction on crude output cuts by OPEC and Russia.

The US West Texas Intermediate crude contracts eased 0.04 percent to $66.73 per barrel as of 08:40 GMT. Meanwhile, Brent futures were down 0.19 percent at $75.25 a barrel.

The Organization of the Petroleum Exporting Countries and energy ministers of non-OPEC countries such as Russia are gathering in Vienna on June 22 to discuss the possibility to partially halt production cuts to avoid market disorders.

Representatives from Saudi Arabia and Russia have already expressed concerns about the situation surrounding Venezuela and Iran. Both nations could potentially face US sanctions in the near term, which would certainly push them to reduce output levels far beyond.

The Trump administration is expected to impose a batch of fresh economic sanctions against Tehran following the President’s decision to pull out from the 2015 nuclear deal.

On the other hand, Trump is also targeting Venezuela’s Nicolas Maduro for incurring on what he described as “unconstitutional practices” in the latest national elections.

Venezuela has been cutting its production more than it should according to OPEC’s figures. The Caribbean country is facing a deep economic crisis.

Sources believe OPEC and Russia could decide to increase by 1 million barrels per day the crude production in the next meeting. The oil cartel and its allies have maintain 1.8 million barrels per day cuts for the last two years.

Meanwhile, a strong dollar continues to weigh on crude prices as energy commodities are denominated in the US currency. A stronger greenback makes oil more expensive for investors holding other currencies, therefore dampening demand for these assets.

FortFS