Forecast for the week August 14 through August 18:
This week we are observing unclear fundamental situation. On the one hand, gold rise may be expected due to US dollar fall, which is always good for gold. According to CFTC large speculators keep ramping up long gold positions; over the last week longs have increased by 19.1 thousand contracts that confirms strong interest of investors in gold. On the other hand, inflation expectations in G-10 countries are declining, and this is a negative factor for gold, as investors use gold as means of protection against high inflation. When inflation rate drops, there is no need to buy gold. Trading signals: flat 1270-1300.
Oil is now trading at its 2-month high, and I believe uptrend will continue for two reasons. Firstly, we still have increased season oil products demand. Crude oil inventories in USA dropped to ten-month low reaching 475.4 million barrels. It is worth noting that level of 468.1 million barrels is an eighteen-month low. In September we are likely to see inverse dynamics – inventories are likely to grow. However, it is still three weeks for oil to decline, this factor has a positive impact on oil price. Secondly, US dollar is going to support oil prices. USDX is now steadily trading at its thirteen-month low, which traditionally supports oil quotes. Trading signals: Buy 51,60/50,42 and take profit 53,60.
Stock market leaders continue to please investors with positive earnings reports. On the previous week Walt Disney Company and NVIDIA Corporation reported growth of quarterly earnings, with the latter increasing net profit by 2.5 times. This week all the attention will be focused on Alibaba Group report, which is scheduled on August 17th. The market is anticipating positive financial results, that will positively affect optimism of investors. US government bonds market dynamics also plays into the hands of bulls. Debt securities yield decreases, while inflation expectations fall, which makes investment is shares more attractive. Trading signals: Buy 2440/2420 and take profit 2480.