NEWS UPDATES OF GOLD & CRUDE OIL - 29 APR 2016

How Long Oil will Climb?

The Fed's decision continues a good week for oil prices, with research by an industry group earlier this week indicating US crude inventories had dropped in the latest week, according to Reuters.

In its statement, the US central bank implied it was in no hurry to raise rates, continuing the increasingly dovish tone it has taken since raising rates for the first time in December.

Meanwhile, the latest figures revealed the US economy had slowed to its weakest pace in two years in Q1, growing by just 0.1%, down from 0.4% in the previous quarter and below analysts' forecasts of 0.2%.

Despite slipping from the highs, analysts said oil market sentiment had clearly turned bullish, and further price rises were likely.

"Nothing appears capable of stopping the surge in oil prices at the moment," Commerzbank said on Thursday. Analysts also said there were immediate supply risks from Venezuela, which is facing a severe

electricity crisis, that needed to be factored in.

Venezuela is an immediate supply risk. In the next two weeks there is potential to have some serious disruption," Olivier Jakob at consultancy Petromatrix said.

Falling U.S. output has also been a supporting factor in oil's recovery.                                           

Commerzbank warned that oil prices at $50 a barrel should make drilling attractive again for some shale producers. 

analysts said further bullish momentum could emerge due to the ongoing weakness in the dollar, which is down almost 6 per cent this year against a basket of leading currencies. 

In an interview with AFP, IMF regional chief Masood Ahmed also said the oil-exporting Gulf states should press forward with diversifying their revenue bases, faced with persistent

low crude prices. OPEC heavyweight Saudi Arabia on Monday floated a raft of reforms aimed at diversifying its almost total economic reliance on crumbling oil prices. This year will

see "a continuation of a low oil-price environment, so we are going to see further - maybe $100 billion or so - in terms of lower revenues from oil exports," Ahmed said of the GCC which

groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Gold:

GDP printed at 0.5% for Q1 against expectations of 0.7%. Gold gained over $16.00 to trade at 1266.65 as the drop in growth signals that the Fed will not be ready to raise rates anytime soon.

On Wednesday the FOMC held rates and policy and issued a rather generic statement which left the door open to a rate increase in June but that door was slammed shut after today’s data release.

Gold has rallied 17% this year on expectations that the Fed will not raise rates aggressively this year due to global economic risks. The US central bank hiked rates in December for the first time in nearly a decade.

After three straight years of losses, analysts are finally prepared to say gold prices have found a floor, with rising prices seen this year and next as concerns over the pace of US monetary policy tightening fade.

        

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