Forecast for the week 27 - 31 of July:
This week we should expect continuation of the bearish trend. First, the last week yield of the US 10-year treasuries fell by 10 points indicating that decline of inflation expectations in this leading economy. To a large extent, it was caused by decrease of sales in the "black gold" market, because oil is a strong indicator of inflation. Investors have traditionally used "yellow metal" to hedge inflation risks, and now this factor is not relevant. Thus, we do not expect a strong demand in XAU/USD. Secondly, gold is below the psychological level of $ 1,100 per ounce - the lowest level in the past five years. This factor is only psychological, but do not forget psychology matters for the stock market and in this regard, gold seller will become more active. Against this background, it is necessary to open Sell positions on growth of quotations to 1111/1131 and take profit around 1078.
XPT/USD and XPD/USD:
During the week downtrend will dominate. Firstly, manufacturing sector of the US, Eurozone and China show a moderate growth, which does not allow to rely on strong demand in industrial metals. Negative trend in China is of our particular note. For 5 months in succession, PMI index of the manufacturing sector of the second economy in the world has been lower than 50. Moreover, annual average rate is also below the critical level, indicating a significant slowdown of Chinese economic growth. Thus, we can expect a decline in demand in physical metal from China. Secondly, the past week CRB Commodity Index lost a record-making value - 4.4% - indicating a massive sell-off of commodity assets. Ii is a strong trend and the tendency is likely to continue rather than reverses. Against this background, in the middle of the week we should open Sell position with XPT/USD on he growth of quotations to 1016/1040 and take profit and open Sell position around 950 with XPD/USD on growth of quotations to 639/655 and take profit around 600.
During the week bearish determination is expected to dominate. Firstly, debt market shows decline of differential of yields of short-term and long-term US treasuries, indicating that increase of expectations regarding the raise of the interest rate in September by the US Federal Reserve. It is not necessary that the first raise of the rate will occur this month, but now the market targets it and this factor is negative for the stock market. Secondly, on Thursday (July 30) the report on GDP for the 2nd quarter is scheduled to be released. As for this report, we hardly expect strong figures in it. The index of industrial production, which determines dynamics of business cycle the best, has been showing a moderate growth in the second quarter of this year. Thirdly, the last month, the US stock market has been demonstrating rally in its "defensive sectors": a strong demand for paper is present in the utilities sector as well as in the sector of everyday consumption. Traditionally, growth of these sectors is a negative factor for the stock market, as investors are worried about current position of the stock market and invest money in these "defensive assets". Fourthly, the last week, all leading global stock markets were closed in the red zone proving that investors leave risky assets. This factor will also exert a downward pressure on the US stock market. Against this background, this week we should open Sell position on growth of quotations to 2089/2105 and take profit around 2050.