Two reasons to sell XAU/USD
Forecast for 8 一12 August:
The first week of August was closed by gold in the "red" zone, and this trend is expected to continue this week as well. Firstly, in the G-7 countries, inflation on expectations are falling, which is usually negative for gold used by investors to protect themselves against inflation risks. Secondly, Friday's positive report on the US labor market boosted US dollar, which is also a negative factor for the yellow metal as its price is denominated in US currency. In the United States, investors often treat gold as the "anti-dollar" pointing to its strong negative correlation against US currency. During the two summer months, in the US economy 547 000. new jobs were created, which is by 8.3% higher than a year earlier. Investors again talk that the September's raise of the interest rate by Fed's is a reality, because statistics is quite positive. In general, these rumors are enough to ensure a smooth growth of US dollar prior to the FOMC meeting on September 21. In this regard, the gold will be put under an extra pressure. This week we should open Sell positions on growth of quotations to 1337/1353 and take profit at 1312.
Should we expect drop of oil prices or will we face a new wave of growth? The first option is more probable for two reasons. First, for two weeks in a row, US crude oil reserves have been growing. During this period, reserves rose by 3.08 million barrels, while investors expected reduction of reserves by about the same amount. The Friday's release of the oilfield services company again Baker Hughes pointed to growth in the number of drilling rigs in the USA by 7 units to the level 381. The lowest figure was recorded on May 27 when the number of drilling rigs amounted to 316 units. At the beginning of this year, when the quotes were below $30/barrel, there were 362 rigs. Russia, which at the beginning of the year actively advocated freeze of mining, is starting to gradually increase the volume of supply, since it main rival Saudi Arabia engaged is low-balling in Asia. In January sanctions were lifted from Iran and now it is rapidly ramping up oil production not willing to discuss "freeze" and participating in joint action with other players. Iran urgently needs financial resources and it is quite natural that its government seeks to quickly regain lost ground in the market. Secondly, based on macro-economic forecasts and releases of G-10 central banks, we can conclude that GDP of the world's leading countries is slowing down and in this regard, the demand in oil will drop. Thus, the supply and demand imbalance is coming to the fore once again. This imbalance is going to knockdown oil. This week we should open Sell positions on growth of quotations to 44.55/45.50 and take profit at 41.60.
This week there is a mixed news background. On the one hand, a strong labor market data will support the stock market in the short term. "Risk appetite" is growing again 一 and this is indicated by negative dynamics of safe assets as well as by a strong decline of the index of "fear" VIX. On the other hand, on Friday, the broad market index updated its historical High, and expectations regarding toughening of monetary by the Fed's are growing. Investment funds can use this tendency to settle in profit on long positions, thus causing the market correction. Raise of the interest rate is usually negatively treated by stock market, because yield on bonds is growing and return on equity is reduced. On Friday Dow Jones index 30 did not update its historical High, which can also be a bearish signal. This week we should expect flat within the range 2140 一 2200.
Alexander GoryachevAnalyst of «FreshForex» company
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