Forecast for September 26 - 30:
Despite the fact that oil finished the last week in the "red zone", and stock markets in the "green" one, the last week, gold had been in demand. This contradiction is temporary and this week gold will be in a recession. The yellow metal was supported by reluctance of the US Federal Reserve to raise the interest rate at the meeting on 21 September. Against this backdrop, the dollar index USDX sank by 0.72%, as gold is usually supported by depreciation of US dollar. The market has already played the FOMC meeting back and will now return to the previous figures. Since the world still has the "risk appetite", investors will build on long positions on shares on correction and open short positions with gold, which is now at high levels.
Thus, this week we should open Sell position on growth of quotations to 1345/1355 and take profit at 1323.
The main event of the week will be the International Energy Forum, which will be held in Algiera from 26 to 28 September. A month before this event, the world's largest oil producers began to call each other to work out a set of measures aimed at stabilizing the market. One of the measures can be freeze of the oil production. As a result, Russia and Saudi Arabia signed an agreement on cooperation. Now let's analyze the basic scenario of the summit. The first scenario: decision to freeze the level of production by OPEC countries and other major players. Will this decision boost the uptrend? No, because the level of production in Russia and Saudi Arabia is now at historical highs, as demand has not kept pace with this trend. If production is frozen, what about the surplus, which world-wide reserves is about 2.5 million barrels per day? The second scenario: no decision to freeze oil production will be made, but the parties will declare possible measures taken if it is deemed necessary. Such a scenario is the most probable one. We must not forget that in April there was a similar meeting in Doha as Brent price was $43 per barrel, but players could not agree. Why would they do it now, when the price of the barrel is by 8% higher now? On Friday, September 23 representatives of the Ministry of Energy of Saudi Arabia stated that they treat Algerian summit as an opportunity for consultation, and they do no expect any crucial decisions to be made there. Thus, this week we should open Sell position on growth of quotations to 46.90/47.50 and take profit at 45.10.
The last week, the Investment Bank of America Merrill Lynch reported about that the funds investing in shares had demonstrated the highest outflow of capital from the USA for the last 3 months. It also stated that the same trend is true for Europe and emerging markets. What is the reason behind: is it beginning of massive sales or correction? The second scenario is more probable. First, in the same report, Bank of America Merrill Lynch pointed to inflow of funds invested in the Japanese stock market. If operations with risky assets begin to be closed, such a process will be the same in all continents. The Japanese market is the second market in the world after the US and it must show the negative sentiment as well However, this negative mood is not observed in Japan. Second, when the stock markets show a less "risk appetite", a so-called fear index immediately begins to grow. In the USA, it is the S&P500 VIX, in Japan it is the Nikkei Volatility. However, the last week, both indexes dropped by 20% and 18.3%, respectively, indicating a lack of strong fears among investors. Thus, this week we should open Buy trades on decline of the price to 2155/2136 and settle in profit at 2180.