Chinese pressure on the platinum group metals | 11 September 2015

Forecast for September 7 - September 11:

XAU/USD:

During the week we should expect predominance of "bearish" sentiment. Firstly, growth of yield of US two-years' treasury bonds after release of the labor market report will contribute to demand for the US currency and thus will put pressure on the precious metal. Reduction of the unemployment rate to the level 5.1% and also increase in the average wage in August by 0.3% compared with July's data indicates rise in inflation expectations. Expectations of the interest rate's rise scheduled for the September meeting of the US Federal Reserve has increased again , and this factor will support the US currency. Second, correction phase of the oil market is close to the final, which also increases pressure on the "yellow metal". China continues to disappoint investors with its weak macroeconomic releases, US Department of Energy has reported increase in crude oil reserves. These two factors are sufficient for continuation of the bearish trend in the market of "black gold". This week we open Sell position on growth of quotations to 1126/1136 and take profit around 1105.

XPT/USD and XPD/USD:

This week platinum group metals will be under pressure again. Firstly, economic slowdown in China is a strong negative factor. PMI index of the manufacturing sector in China for has been below 50% level for 6 months in succession, indicating a severe recession. In August, business activity of industrial sector in China fell to its lowest level for six years, which will help to reduce demand for physical metal. China is the world's second largest car manufacturer and stagnation of the sector is negative for platinum group metals, because "car industry" provides the basic demand for the metal. Second, as we noted earlier, this week you can expect growth of quotations of the US currency in contrast to growing inflationary expectations, which is also negative for the metal, because cost of raw materials is denominated in US dollars In the middle of this week we open Sell position with XPT / USD on growth of quotations to 1000/1020 and take profit around 980 and Sell positions with XPD / USD on growth of quotations to 580/600 and take profit around 560.

S&P500:

Publication of important macroeconomic statistics from the United States is scheduled for this week. In this regard, mood in the US stock market will depend on investors's approach to "Risks". At the end of last week, leading stock markets closed in the "red zone". The largest decline was recorded in Asia again, and this time it was s not China, and it was Japan. Nikkei 225 lost 7.02%. Japanese institutional investors are reviewing their international portfolios. If in July they bought more shares, in August, proportion of shares was reduced by 29.93% and bonds took first place. Since most of the Japanese investments are made in the USA as in the most developed stock market in the world, we can conclude about withdrawal of the capital to the "quality" assets - bonds. Against this background, we usually have investors' appetite for risk", which is a negative factor for the stock market. Market width indicator also confirms the negative market trend - majority of shares are traded in the United States in the "red zone." We open Sell positions on growth of quotations to 1934/1961 and take profit around 1901.