What’s next? – GOLD, OIL 05.06.18

GOLD

Gold futures were down in early trading hours on Tuesday as the greenback consolidated its position above the 94 mark.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.05 percent at $1,296.50 a troy ounce as of 10:00 GMT.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was down 0.11 percent at 93.88 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.

As no major economic releases are due this week, market participants are closely monitoring geopolitical developments. Yesterday, the White House confirmed a time for the historic summit between US President Donald Trump and North Korean leader Kim Jong Un.

Both leaders are set to meet at 09:00 am in Singapore on June 12. The meeting is seen as a major improvement in international relations and a great opportunity to denuclearise the Korean peninsula.

Gold - one of the world’s most popular safe-haven assets - could experience increasing pressure as investors expect good results out of this encounter. The US dollar, on the other hand, could benefit from this meeting.

Ahead in today’s session, traders will keep an eye on the following releases: Markit Economics and the Institute for Supply Management will unveil their services (also non-manufacturing) PMIs for May at 14:00 GMT. JOLTs job openings for April will be out by the same hour.

OIL

Oil futures recovered in Asian hours on Tuesday despite an increasing US output and expectations of higher production by OPEC.

The US West Texas Intermediate crude contracts rose 0.53 percent to $65.09 per barrel as of 10:00 GMT. Meanwhile, Brent futures were up 0.07 percent at $75.34 a barrel.

Market participants are preparing for the next meeting of the Organization of the Petroleum Exporting Countries (OPEC), which takes place in Vienna on June 22. Members of the cartel and its allies will be discussing whether is a good idea to partially halt output cuts in the light of the US economic sanctions imposed on Iran and Venezuela.

Early rumours pointed out that OPEC and Russia were ready to increase output by 1 million barrels per day. The current agreement stands for a 1.8 million barrels per day reduction and it is expected to finish by the end of 2018.

Market analysts are saying this is nowadays the main driver for oil prices and that it all will come to the decision of OPEC and Russia. That decision will set the market tone and define a direction for months to come.

Last week, oilfield services company Baker Hughes said the total rig count moved to 861 units, adding two to reach its highest level since 2015.

Ahead today, investors await the release of weekly crude estimated by the American Petroleum Institute as of 20:30 GMT. On Wednesday, attention will be directed to official inventories by the US Energy Information Administration at 14:30 GMT.

FortFS