What’s next? – GOLD, OIL 04.06.18

GOLD

Gold futures struggled for direction in early trading hours on Monday, as market players awaited key economic releases later this week and geopolitical concerns eased.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.15 percent at $1,297.30 a troy ounce as of 09:30 GMT.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was down 0.24 percent at 93.95 by the time of this writing.

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.

Demand for safe-haven assets continued to fall over the weekend as no major progress was made regarding the US-China trade dispute.

Investors are also feeling excited about the historical summit between US President Donald Trump and the North Korean leader Kim Jong Un, which is scheduled on June 12.

Risk-on sentiment was also supported by the latest employment figures in the United States. According to the Labor Department, the US economy added 223,000 jobs in May, well above the 159,000 registered in the same period last week.

The news boosted expectations for further monetary policy changes by the Federal Reserve. The US regulator is widely expected to increase its benchmark rate by 25 basis points later this month, which would put the rate in a range between 1.75 and 2.00 percent.

Ahead in today’s session, traders will keep an eye on the following releases: Factory orders for April as of 14:00 GMT and Japan’s household spending for April at 23:30 GMT.

OIL

Oil futures eased in Asian hours on Monday based on record US production levels and higher chances that OPEC and its allies will cap output cuts later this month.

The US West Texas Intermediate crude contracts rose 0.12 percent to $65.89 per barrel as of 09:30 GMT. Meanwhile, Brent futures were down 0.01 percent at $76.71 a barrel.

According to the US Energy Information Administration, US crude output has increased by more than a quarter in the last two years, to about 10.47 million barrels per day.

This level puts the United States on the second place in the list of world top producers. The first place is currently taken by Russia with 11 million barrels per day.

However, the Paris-based International Energy Agency said the US could soon become the world’s top producer if shale producers will keep its activity levels.

Last week, General Electric’s oilfield services company Baker Hughes reported an addiction of two rigs to the country’s rig count, leaving the total at 861 units, the highest since 2015.

Meanwhile, investors continued to weigh the possibility of OPEC and non-OPEC nations increasing production by 1 million barrels per day.

The oil cartel and its allies will meeting in Vienna on June 22 to discuss the future of the agreement and the problems related to Venezuela and Iran.

At the time, oil cuts are running at a 1.8 million barrels per day rate and it is set to keep that way until the end of this year.

Ahead in the week, fresh inventories in the US will be monitored on Tuesday and Wednesday.

FortFS