The forecast for the week 7-11 of March:
Many traders wonder what will happen to the quotations of gold? Some of them point to a strong overboughtness of the yellow metal and predict correction. Others say that growth is not over yet, and we will see a hike to psychological level 1300. All these points do not sound strange, but truth is in the middle. Let's look at the dynamics of the US currency, as gold is denominated in US dollars and the cost is heavily dependent on US prices. At the end of the last trading week, the US dollar index basket lost 0.96% on weak ISM data because of changes in the trade balance and indicators for the manufacturing and service sectors. To make gold fall in price, the US dollar should rise. However, now the US currency has no drivers for growth in the short run. Macroeconomic statistics is in general moderately negative, on March 16 FOMC is not expected to raise interest rates. Thus, until the end of the month, the dollar basket index USDX will be in flat 94.00 -99.00, which is a positive factor for the precious metal. We can not ignore overall positive dynamics of the commodity market: at the end of last week, CRB index rose by 4.18% - it has been a maximum weekly gain over the last six months. Investors are building up long positions in commodities, and gold, of course, will receive dividends from this. We talked about the positive factors, now let's talk about risks. On Thursday March 10, ECB will hold its scheduled meeting and we can expect ease of the monetary policy. This factor, in turn, will support demand in risk assets that will put the precious metal under pressure as a safe asset. So this week we expect flat within the range 1230 -1290.
During the week we should open long positions because of two reasons. Firstly, investors ignored Wednesday's negative release on crude oil reserves of energy from the US Department . The last week of February, inventories rose by 10.37 mln. Barrels, which is the highest level for the whole winter. So weak data had to cause a sharp decrease in quotations of black gold, but the market gave the moderate reaction to this event and after a while oil quotations resumed growth. In this regard, we can tell about a large number of buyers in the market, which build Long positions on pullbacks and do not allow to bring quotations down. Secondly, in the second half of the month (around March 20) Russia may run meeting of the world's leading exporters of oil to stabilize the market. This will be the second meeting, I recall that the first was held on February 16 in Doha, which participated gathered delegates from Russian Federation, Saudi Arabia, Venezuela and Qatar. The second meeting is expected to be even greater. Recent negotiations between leading players gave the market the upward momentum, so we expect the same outcome from the coming meeting. Against this background, we should open Buy positions on BRENT expecting frop of quotations to 37.70/36.30 and take profit around 39.60.
Last week, a driver of growth on the US stock market was the energy sector, where quotes rose by 7.66%. And this was despite the fact that most of the energy companies released weak quarterly reports. Revenue and profit of the company is falling on the background of lower commodity prices. It is impossible to ignore the published releases from the ISM for the manufacturing and service sectors. Industrial PMI for the fifth month in a row has been below 50% indicating decline in business activity, and the PMI services sector has been demonstrating weakness during the past four months, but growth of business activity is still present. In this regard, we can conclude that rapid growth of the US economy came to its expected end, and this year we expect a slowdown of economic growth, which will be negatively perceived by players of the stock market. This week important macroeconomic statistics is not scheduled for release, in this regard, we should pay attention to dynamics of the bond market. Over the past three trading weeks, the yield of 2-years' treasury bonds rose by 14 basis points to the level of 0.86%, which is a negative factor for stock market. Historically, the yield of bonds and stock market have an inverse correlation. On Friday, S&P500 was unable to close the week above the psychological level 2000, which also confirms this trend. We cannot ignore the coming meeting of ECB, where the monetary authorities may decide on further ease of monetary policy, which will render a short-term support both to the European stock markets and the USSo, a mixed background does not only allow us to select the direction and within a week we should expect flat within the range 1950-2050.