What’s next? – GOLD, OIL 07.06.18

GOLD

Gold futures traded in red territory on Friday, despite market sentiment continued under pressure ahead of a meeting between President Donald Trump and a group of foreign leaders, including the Prime Minister of Canada and the French President.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.05 percent at $1,302.30 a troy ounce as of 10:00 GMT.

Weighing on the metal was a rebound in the dollar’s position earlier this morning. The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.26 percent at 93.62 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.

The American currency is supported by rising expectations that the Federal Open Market Committee will raise interest rates by 25 basis points during its next meeting.

The US regular will gather next week to announce its interest rate decision. At the moment, the benchmark rate stands in a range between 1.50 percent and 1.75 percent. If the Federal Reserve moves forward with the second rate adjustment of 2018, the dollar is likely to extend gains in the short term.

Economic reports and labor market conditions have been solid in the last couple of months, suggesting the Fed should keep on track with its monetary normalisation process. May report on unemployment and nonfarm payrolls boosted confidence among investors.

No major economic data is scheduled ahead in the day.

OIL

Crude oil futures were trading lower in early hours on Friday, with both major contracts down based on fears that the Organisation for the Petroleum Exporting Countries (OPEC) and its allies will soon decide to partially halt its production agreement.

The US West Texas Intermediate crude contracts eased 0.39 percent to $65.69 per barrel as of 10:00 GMT. Meanwhile, Brent futures were up 0.25 percent at $76.92 a barrel.

According to Reuters, Algeria’s oil minister Mustapha Guitouni said the cartel should be focused on balancing the market rather than on putting an end to its current deal.

In other news, the African nation also announce a revision of its energy law, which is expected to be ready by the beginning of 2019. The revision is necessary to attract new investors into the market.

OPEC and key allies such as Russia are gathering in Vienna on June 22 to discuss a potential solution for the ongoing output crisis weighing on Venezuela and Iran. Both nations have been heavily under pressure following threats of economic sanctions by the Trump administration.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.26 percent at 93.62 by the time of this writing.

Earlier this week, the US Energy Information Administration said that crude inventories rose by 2.072 million barrels following an increase in local production up to 10.8 million barrels per day.

Ahead in today’s session, players will be looking at a fresh reading on Baker Hughes’ oil rig count at 18:00 GMT.

FortFS