What’s next? – GOLD, OIL 31.05.18

GOLD

Gold futures were higher in Asian hours on Thursday, as market participants prepared for fresh batch of inflation data.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.20 percent at $1,309.10 a troy ounce as of 10:00 GMT.

The yellow metal settled around the $1,300 psychological mark at the end of the previous session, with US 10-year Treasury bond yield supporting the dollar’s demand.

Gold is sensitive to moves in the US dollar. As the metal is denominated in US dollars, a stronger currency makes it more expensive for investors holding other currencies.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was down 0.40 percent at 93.74 by the time of this writing.

On Wednesday, gold futures traded in a narrow range as fears over the political future of Italy and the rest of Europe eased, weighing on demand for safe-haven asset such as gold or the yen.

Market participants seemed to have priced in the possibility of snap elections in autumn, despite the recently nominated Prime Minister Carlo Cottarelli has repeatedly insisted on “new possibilities” to form a government.

On the other side, China said it was ready for any trade war in response to the decision made by the Trump administration to move forward with a list of $50 billion worth of tariffs on Chinese goods as soon as next month.

Ahead in the session, traders will directing their attention to the US core PCE Price Index for April and initial jobless claims at 12:30 GMT, which come along with personal spending for April. Pending home sales for April are scheduled at 14:00 GMT. The Energy Information Administration will release its weekly crude and refined product stockpile as of 15:00 GMT.

OIL

Oil futures were down in early trading hours on Thursday following an unexpected increase in crude supplies in the US.

The US West Texas Intermediate crude contracts eased 0.57 percent to $67.82 per barrel as of 10:00 GMT. Meanwhile, Brent futures were down 0.19 percent at $75.35 a barrel.

The build in inventories is not only bearish for crude benchmarks, but news also fuelled speculation about potential reduction on output cuts by the Organisation of the Petroleum Exporting Countries and Russia.

According to the American Petroleum Institute, crude supplies increased by 1 million barrels in the week ended May 25 to 434.9 million barrels. US production is currently standing at 10.73 million bpd, close to Russia - the world’s largest oil producer - with 11 million bpd.

OPEC and Russia might begin to increase their crude production in the second-half of 2018 by 1 million barrels per day, which would leave output cuts at 800,000 barrels per day. The move is expected to avoid excess in demand due to expected reductions in Venezuela and Iran.

OPEC and non-OPEC producers will gather in Vienna on June 22 to discuss the future of production cuts. Any signs that the cartel and its allies will move forward with an output increase would certainly weigh hard on prices.

FortFS