Forecast for the week March 21 - 25:
Commodities are in a steady demand, but the "yellow metal" is to give its positions. Gold price was positively influenced by decline of the US currency: over the past three weeks the dollar index basket (USDX) has lost 3.15%. It was also boosted by inflation expectations, against rising energy prices. As we can see positive background remains the same: US dollar fell after the FOMC meeting, and oil, in spite of correction in the first half of last week, finished in the "green zone". So, shall we open Buy positions and wait for growth of quotations? In my opinion, no. This is a short-term support for the precious metal, which you should use to open Sell position. Growth of risk appetite will put gold as a safe asset under pressure. In March, a positive environment for global equity markets was formed: ECB decided on further ease of its monetary policy and the US Federal Reserve lowered its forecast on raising interest rates. When the two leading Central Banks stick to the "cheap money policy" - bulls buy shares on exchanges. Dynamics of XAU USD and S&P500 index confirms this trend: in the last five weeks gold has gained 1.36%, while the broad market index added 9.74% So we shall open Sell positions on growth of quotations to 1262/1276 and take profit at the level of 1227.
Oil has been growing over the past five trading week and investors are actively buying back their drawdown, which indicates a steady uptrend. In my view, this week we should open Buy positions for two reasons. Firstly, the US Federal Reserve lowered its forecast for the current year, which is a negative factor for US dollar and positive for the black gold as the price of oil is denominated in US currency. If in December the Fed planned to raise interest rates in 2016 to 1%, now 0.5% raise is expected. Secondly, key players of the global market agreed to meet in Doha on 17 April to reach a consensus regarding freeze of oil production. Now, anticipating the summit, investors continue to accumulate their long positions, which contributes to growth of quotations. We can not ignore drop of gasoline reserves in the United States. Over the past four weeks, these stocks fell by 8.97 million barrels. So, positive background is still hereand in this regard, we should open Buy position expecting drop of quotations to 40.70/39.70 and take profit around 42.50.
On Monday we can not exclude drop of quotations, because technical correction jas brewed: index quotes has been growing over the last five trading weeks, however, this decline should be used to build long positions. US Fed did not disappoint players of the US stock market. Monetary authorities are reluctant to tighten their monetary policy aggressively, which plays into the hands of "bulls". Yield of the two-years' treasuries which reflects expectations on FED's rate decision and represents the opposite direction to the exchange's movement, decreased by 0.11% at the end of last week. In my view, this factor is positive in the short run, prior to the season of corporate reporting, which starts in two weeks. The second week in a row, US exchange has been driven by the energy sector, which lifts the market: oil rally contributes to a strong demand in shares of the oil and gas sectors. As we noted earlier: positive background on "black gold" allows us to rely on continuation of the upward trend So, this week we should open Buy positions expecting drop of quotations to 2028/2005 and take profit around 2060.