Gold prices were hovering near one-week highs on Friday, as fresh concerns over U.S. tax reform plans weighed on the dollar and as markets were still digesting the Federal Reserve’s latest policy statement.
Gold Prices Hover Near 1-Week Highs on Weaker Dollar – Gold prices were hovering near one-week highs on Friday, as fresh concerns over U.S. tax reform plans weighed on the dollar and as markets were still digesting the Federal Reserve’s latest policy statement. The greenback came under pressure after two U.S. Republican senators on Thursday sought changes to the proposed U.S. tax reform bill. The bill needs a simple majority to pass in the Senate, in which Republicans hold just 52 of the 100 seats. On Wednesday, the Fed raised interest rates by 0.25 basis points to 1.50% at the conclusion of its policy meeting, in line with expectations. However, the central bank did not change its projections for 2018, which include three more interest rate hikes in both 2018 and 2019, disappointing expectations for four rate hikes next year. Gold is sensitive to moves in both U.S. rates and the dollar. A weaker dollar makes gold less expensive for holders of foreign currency.
Oil prices rise on North Sea pipeline outage, but growing US output looms – Oil prices moved up on Friday, lifted by the Forties pipeline outage in the North Sea and ongoing OPEC-led production cuts, although rising output from the United States kept a lid on markets. The ongoing outage of the Forties pipeline, which carries North Sea oil to Britain, was the main price driver, traders said. “Forties pipeline operator Ineos declared force majeure on crude deliveries following Tuesday’s discovery of leaks in the pipeline, indicating that repairs could take several weeks,” U.S. investment bank Jefferies said. While the pipeline outage physically mostly affects the North Sea region, it is of global relevance as the crude it supplies is part of the supply that underpins the Brent price benchmark. “If the duration of the outage is for several weeks it should put upward pressure on the Brent price,” Jefferies said. Beyond the North Sea supply disruption, traders said markets were generally supported by efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold production to prop up prices. Goldman Sachs (NYSE:GS) said that market conditions allowed the major oil companies, which it referred as Big Oil, to enter “a positive earnings-revision cycle” and that “this should allow Big Oil to re-employ capital at double-digit returns”.
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