It's right time to get rid of gold
The forecast for week 17 - 21 of August:
Correctional movement of gold is about to finish and soon we expect development of a new downward trend because of the two reasons. Firstly, inflation expectations of the world's leading economy are still quite low, and for the most part it is because of the low prices for "black gold". At the end of the last week, WTI crude oil lost 3.97%, Brent lost a little more than 1%. Growth of oil supply in the world is gradually increasing, and car season in the USA and Europe will finish in a month, which will contribute to new imbalance in the oil market. Sales in the oil market will bring down quotes of the "yellow metal". Secondly, the United States in the first half of the month pleased investors with strong data on labor market, retail sales and industrial production, thereby increasing the profitability of 2-year Treasury bonds from 0.67% to 0.726%. This factor indicates that market participants are beginning to "lay in quotes" increase of the interesr rate by the US Federal Reserve expected on September 17 of this year. Toughening of monetary policy by the FOMC will boost the US dollar and thus exert a pressure on precious metal Against this background, it is recommended to open Sell positions on growth of quotations to 1118/1130 and take profit around 1092.
XPT/USD and XPD/USD:
During the week we expect dominance of bearish sentiments. Firstly, the United States and China slowed car production, which is a negative factor for both metals, because the car industry it makes provides the basic demand in these metals. It should be noted that China shows a negative trend during the second quarter. Secondly, we can not ignore dynamics of copper's quotations. This metal is widely used in the manufacturing sector of the economy and is a leading indicator for the market of industrial metals. Copper's quotations demonstrate a strong downward trend that tells about a weakness of the global economy. Under these conditions, platinum and palladium traditionally show weakness. Thirdly, as we've noted above - on the Forex market has strengthened expectations of raising of the interst rate by the Fed's, which will boost the US dollar and put pressure on commodity prices, because their costs are denominated in the US currency.Against this background, in the middle of the week we should open Sell position with XPT/USD on growth of quotations to 1000/1011 and Take Profit in 970 and open Sell trades with XPD/USD on growth of quotations to 626/638 and take profits around 595.
It may sound strange, but positive economic data from the US today is a threat to the US stock market. Although for traders are familiar with basics of fundamental analysis, nothing would seem extraordinary about that. Without exception, financial markets now anticipate that the US Federal Reserve would rise the interest rate. This, in turn, is negative for the stock market. The more powerful releases we receive from the United States, the more market participants expect toughening of monetary policy that will happen on September 17. The past week, we got a whole batch of strong reports, in which we have to note growth of industrial production by 0.6% at the end of July. This indicator allows to assess current business cycle the best and its increase predicts a possible increase in rates. This week we will receive inflation data for July. PPI index for the end of July was above market expectations, indicating growth of core inflation to 1.9%. Thus, core CPI key level is approaching to the key FOMC level (2%). In this regard, we can expect s continuation of growth of 2-years' Treasury bonds' yeild, which will contribute to an outflow of capital from the stock market. It should also be noted that results of the last five days the utilities sector was the leader of growth. It is among the defensive sectors. During periods of negative trend, investors "leave" to "safe" sectors. Thus, we get another confirmation of the downward trend in the US stock market.Against this background, during the week should open Sell position on growth of quotations to 2097/2111 and Take profit around 2057.
Alexander GoryachevAnalyst of «FreshForex» company
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