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Gold can only head for South

The forecast for the week 16 - 20 of November:


So, the last week the precious metal had set a fresh Low for the past five and a half years and now there is a danger for gold to decline to about $1000/oz. Will we see this level this week? In my opinion, no, but the "yellow metal" can test this level in December. Current market conditions indicate that only sales are relevant for gold. Opening long positions now is quite risky. Sales in the oil market that we have seen in the past two trading weeks, will put downward pressure on inflation expectations in G-7 countries. This factor is egative for gold, as investors usually used hedge their inflation risks with the help of this asset. Cause there is no inflation, then there is no need to buy the precious metal. We should also pay attention to the factor of oil prices, which can change the negative trend in the oil market. US oil reserves have been rising for seven weeks in run, oil volume has reached the three-month high, despite the notable drop of the number of operating drilling rigs. OPEC is not going to cut oil production and more than that, Saudi Arabia offer some black gold at a discount against market prices. The last Friday, IEA has reported that crude oil reserves in the world had hit a record-making 3 billion's mark, which is due to the high volume production in Iraq, Russia and Saudi Arabia. Thus, correlation between gold and the "black gold" in the medium term will be high enough and you can expect decrease in quotations of both commodities. However, at the beginning of the trading week we should expect growth of quotations of precious metal amid increased geopolitical risks due to terrorist attacks in France. This week we open Sell positions with XAU/USD on growth of quotations to 1105/1135 and TP at 1078.

Золоту дорога только на юг


In the first half of the week we expect dominance of "bullish" behaviour on both metals as the profit will be taken on short positions. Last week, platinum and palladium were among leaders of decline of the commodity market. Car sales at the end of October, the US and China rose to its highest level for the five months, which is a positive factor for the platinum group of metals. Car industry provides the core demand for metals and growth of this sector will deter "bears" from active sales. In this connection, we can expect growth of quotations of XPT/USD to 920/945 and XPD/USD to 590/610. Further, in my opinion, "bears" will come back to again increase short positions at attractive levels. Positive economic data from the United States reinforces expectations of started cycle of raising of the interest rate by the US Federal Reserve. 92% of academic economists, who were interrogated by the reputable Wall Street Journal, expect raise of rates on the federal funds rate on 16 December. Investors open long positions with the Dollar Index (USDX) on short-term correction, based on continuation of the upward trend of the US currency. This factor, in turn, is negative for metals, cause their value is denominated in dollars. Against this background, we should expect flat market for XPT/USD within the range of 850 -910, and the flat for XPD/USD within the range of 531 -600


This week we expect dominance of bullish mood. First, market participants continue to take profit on long positions. From September 27 to November 6 quotes had been growing for 6 weeks in run and once FOMC began to declare a high probability of raising of the interest rate at the December meeting - investors began to actively sell bonds in the US stock market. It is quite reasonable to take profit after a 13% growth of the price, and not to take on more risk. Moreover, the negative trend in the last five days has been observed in all the world's leading stock markets, indicating the global profit-taking, which usually lasts a few weeks, because the portfolio managers exit positions gradually so as not to cause a rapid drop in prices. Second, the oil market should be expected to continue the downward trend against the background of a significant imbalance between demand and supply on the world market, which would have a negative impact on the resource sector of the US stock market and will bring the stock indexes down. However, there is a positive factor for the US stock market. Bearish mood in the commodities market in general and gold in particular usually support stock markets. In this context, one should not expect a strong and rapid decline in quotations for the coming five days Against this background, this week we should open Sell with S&P500 on growth of quotations to 2042/2065 and take profit around 2005.

Alexander Goryachev
Analyst of «FreshForex» company
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