Every market globally – from equities to property, to gold, oil, shares and bonds and beyond – will have more than a weather eye on the US Federal Reserve’s two-day meeting in Washington this week.
The meeting will produce new economic forecasts which will give a big clue to the way Fed members see US interest rates heading and when the much anticipated rise will happen.
No market will be impacted more directly than bonds and commodities – both are impacted by changes in the value of the US dollar and those of late have been increasingly volatile – which is to be expected ahead of such a major change in US monetary policy.
For that reason the prices of key commodities such as oil and gold are going to bounce around a bit for the next few months, while other factors such as supply and demand reports (for oil) and inflation reports (bonds) will be overridden at times by the moves in the greenback (which will reflect expectations about future US interest rates levels to the exclusion of other factors).
That means some swings in the value of the Aussie dollar as well.
So while gold prices rose last week for the first time in a month and oil prices were mostly firmer – that could quite easily change this week once the Fed’s post meeting statement and new economic forecasts are released.
Oil was weaker on Friday despite another small fall in the number of drilling rigs looking for oil and gas in the US oil fields last week.
Worries over excess supply on the back of strong output from some of the world’s major oil producers (OPEC countries sent prices lower for a second straight session on Friday, but signs of a slowdown in US production were a small positive for sentiment).
July US West Texas type crude fell 81 cents, or 1.3%, to settle at $US59.96 a barrel in New York early Saturday, our time.
Based on the most-active contracts, prices saw a gain of around 1.4% on the week.
In London, July Brent crude fell $US1.24, or 1.9%, to $US63.87 a barrel.
Marketwatch said the July contract, which expires tonight, our time, was up about 0.8% for the week, but other contracts were up around 2.1% for the week.
Oil services group, Baker Hughes said the number of rigs actively drilling for oil in the US last week fell by 7 (for a 27th week in a row) to 635, while the total number of rigs in use in the US was down 9 to 859.
Compared to last year, the total rig count has fallen by 995, with the oil rig count down 907, according to Baker Hughes’ data.
In the gold market, Comex futures eased on Friday, but recorded the first weekly gain in a month ahead of the central bank’s meeting this week.
Gold for August delivery fell $US1.20, or 0.1%, to settle at $YS1,179.20 an ounce, with prices up about 1% for the week following declines over the previous three weeks.
July silver lost 13.5 cents, or 0.9%, to $US15.825 an ounce – down 1% for the week.
And Comex copper for July delivery rose a cent to $US2.678 a pound in New York on Friday for a weekly loss of half a per cent.
