Forecast for the week from March 20th to March 24th:
In spite of positive US macroeconomic statistics USDX index closed previous week in red zone, which had a positive impact on precious metal quotes. What do we do with gold: sell or buy? Considering that uptrend on US currency and American shares is likely to continue, we need to sell XAU/USD. We believe, that investors have treated February US Inflation Report and Fed rate hike too pessimistically.
It is worth to mention CFTC report. Over the last two trading weeks in a row large speculators reduce long trades on gold. Total rate sank to two-month lowest. However, selling would be appropriate when gold breaks psychological level of 1200. Trading recommendation: Sell 1199 and take profit 1184.
This week oil flat may be expected as bears and bulls have the same chances to turn the situation in their favor. Let us start with good news: Saudi Arabia Minister of Energy Khalid A. Al-Falih stated that OPEC may extend period of oil output reduction on its meeting on May 25th. Vagit Alekperov the Head of Lukoil one of Russia's largest oil companies has also mentioned the need to extend the agreement signed in the Austrian capital on November 30, 2016. Speculators like such news and will use it to the full.
About risks: USA oil output has increased four trading weeks in a row and exceeded the rate of 9.1 million barrels per day. Since the beginning of the year, oil output has increased by 343 thousand barrels per day. Current oil prices allow most of American oil producers to gain good profit in spite of correction. So oil producers may continue to ramp up their production capacities which will cause new wave of oil output increase. Trading recommendation: flat at 50,00 -53,00.
We are observing increasing of long positions in the expectation of uptrend continuation, considering that historical high was renewed on March 1st at level of 2402.1. Prices have risen significantly, market is heavily overbought, and sharp quotes decrease may be expected, why open Buy positions? There are two reasons for uptrend continuation. First of all, previous week American 10-year Treasuary bonds yield has bounced off from yearly high, which has a positive impact on shares. According to CFTC, large speculators have increased futures contracts long positions again by 24.3 thousand. That confirms steady uptrend.
Second of all, US keep releasing positive macroeconomic statistics. Preliminary March Consumer Confidence Index Report shows rate of 97.6, which indicates increase in consumer spending. In total, first quarter US statistics is quite positive, that allows us to count on corporation income growth. Trading recommendation: Buy 2370/2350 and take profit 2402.