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The capital is escaping risky assets

Forecast for 18 - 22 of January:


In the first half of the week the yellow metal can demonstrate strength against the background of poor in risk appetite of investors. Stock markets are still in a fever; the main cause of this chaos - the Chinese stock market has dipped by 15.32% in the past two weeks. MSCI Emerging Markets Index has updated 2015 Low investors are leaving emerging markets in a hurry. Now it is the turn of the European and North American stock markets. Traditionally, in times of financial instability, gold shows grows, because it is perceived by investors as a safe harbor. However, decline of inflation expectations in the G-7 will limit the rising potential and when gold approaches $1112/1121, we can wintess prevalence of bears. The yield of 10-years' US treasury bonds, which reflect investors' expectations of inflation and closely correlate to the & ldquo; the yellow metal & rdquo; has been dropping for the two trading weeks in a row. During this time, yield of Treasuries fell by 26 basic points. Investors are usually sensitive to this kind of and, in my opinion, growth of XAU/USD will be used by the financial institutions to build short positions, thereby bringing quotations down again to $ 1070 per ounce. So, this week we expect a flat market within the range of 1070 -1121.

The capital is escaping risky assets


During the week, we should expect prevalence of  bearish mood. Market players can not recover from the Chinese shock: two weeks are marked by the panic selling in the commodity market. Since the beginning of this year, CRB Index has lost 9.2%. Now it is clear to all investors - a period of rapid economic growth of China came to an end. Exactly China is the world leader in production of cars. Given that the main demand in the platinum group metals is ensured by the car sector, both metals will see hard times in 2016. On the one hand, growth of car sales in the Euro zone at the end of December can support both metals. However, overall pessimism in the markets indicates that the short-term growth will be used by investors to build short positions. Negative trend is confirmed by the index Baltic Dry, which renders the cost of the sea dry cargo transported through the twenty main routes. The index fell to a new Low for the past thirty years. Stabilisation in the sector of industrial metals will take place only after the stock market in China will touch the bottom & ndash; exactly this indicator now is the advance indicator for platinum and palladium. This week we shall open Sell positions with XPT/USD on growth of quotations to 870/890 and take profit around 833 and open Sell positions with XPD/USD on growth of quotations to 520/540 and take profit around 489.

The capital is escaping risky assets

The capital is escaping risky assets


Now a single idea is dominating on the US stock market as on other stock markets & ndash; outflow of the capital from risky assets. The exchange platforms of emerging markets has already tested 2015 Lows. SnP500 is at the mark of 1834, representing 2.38% of the decline from current levels. In my view, we will see decline to the mentioned area, cause Chinese exchange (the main cause of large-scale sales in the beginning of 2016) still feels very weak. And only after that, it will be possible to observe a partial profit taking on short positions associated with the negative inflation data for December. Data on CPI may get worse than the consensus forecast against the backdrop of a significant slumo of the oil prices and moderate growth of private consumption. In this context, the markets will discuss rumors that FOMC will not decide on tightening its monetary policy on its meeting scheduled for January 27. This may be encourage market players so that they can partially take profit  on shorts positions. This week we shall open Sell trades with S&P500 on growth of quotations to 1895/1925 and take profit around 1839.

The capital is escaping risky assets


Alexander Goryachev
Analyst of «FreshForex» company
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