Forecast 25 - 29 January:
In the first half of the week the precious metal will be under pressure caused by the demand in risky assets. In the first half of January, XAU/USD has enjoyed a steady demand in the face of strong sales in global equity markets. Investors are getting rid of risky assets, which is caused by the fears of a significant slowdown of economic growth in China. Against this background, the capital flew in safe assets like gold and the Japanese yen. At the end of the last week, we saw the opposite trend: investors open long positions in risky assets, as the current low levels are attractive for both short- and medium-term investments. It is impossible to ignore the ECB press conference, where Mario Draghi pointed to a strong decline of inflation expectations in the Euro zone. Thus, investors still have no need to hedge against inflation risks through the gold, which is also a negative factor for quotations of the yellow metal. In the second half of the week it is necessary to pay attention to the FOMC decision on interest rates. In light of recent events: strengthening of US dollar, reduction of China's GDP and strong sales in the oil market & ndash; FED interest rate will not change. In my opinion, we'll see changes on 16 March. FED will point to fears regarding slowed global growth and drop of expectations of inflation once again. In 2015, growth rate of core inflation was 2.08%, against 1.61% a year earlier. This factor leaves FED the room for maneuvers; we can see rise of the interest rate in June and September. Now, however, changes are not expected, that will put the US dollar under pressure, and thus have a positive impact on value of the precious metal This week we expect a flat market within the range of 1070 - 1115.
XPT/USD and XPD/USD:
During the week, we should expect domination of bullish mood. The last week, both metals were closed in the green area, which indicates stabilization of the market. No investment ideas, market is undergoing a regular correction of risky assets that has a positive impact on the platinum group metals. Some investors are taking profit on short positions, the other part open long positions at the low and thus attractive levels. In this context, we observe a smooth growth of prices. As we mentioned earlier, this week the US Federal Reserv is not expected to introduce changes in the monetary policy, which will the US dollar under a downward pressure and plays into the hands of bulls as the cost of commodities is denominated in the US currency Against this background, we should open Buy position with XPT/USD on drop of quotations to 822/812 and take profit around 856 as well as to open Buy position with XPD/USD quotes on drop of quotations to 489/480 and take profit around 514.
This week we should open long positions with this asset for two reasons. Firstly, once a lot of positions were closed in the first half of the month, investors have got appetite for risk again and began to open long positions in risky assets at attractive levels. Troublemaker in global stock markets - the Chinese stock market - for the first time in the last four trading weeks closed in the green area & ndash; thus, growt Shanghai Composite Index was 0.85%. This optimism will contribute to domination of bullish mood in the US stock market. Second, at the upcoming meeting on January 27 FOMC will not change its monetary policy, which is a positive factor for the stock market. In view of recent sales in the oil market, as well as slowdown in retail sales we can expect moderately negative comments on short-term inflation expectations from the monetary authorities. Since the last meeting of the FED, yield of two-year treasury bonds reflecting investors' expectations on the interest rate, dropped by 13 basis points, which clearly confirms the negative trend. In my opinion, this upward trend will be short-term, because medium-term positioning of market players indicates that we entered phase of bearish trend. Among the nine major sectors of the US stock market, the least suffering is a non-cyclical sector of companies, which usually receives support in times of instability.
Against this background, we should open Buy position on drop of quotations to 1895/1870 and take profit around 1943.