FED will continue with a loose monetary policy | 19 June 2020

XAUUSD:

We are expecting an uptrend to develop. Federal Reserve will continue with a loose monetary policy for some time leading investors to see value in the yellow metal. Federal Reserve said it would hold the benchmark rate near zero. FED plans to continue to increase SOMA holdings of Treasury securities at the current pace, which is the equivalent of approximately $80 billion per month. This is a positive signal for gold! A loose monetary policy helps gold’s attractiveness as such a policy is often deemed as inflationary. Gold is widely considered an inflationary hedge because it is priced in U.S. dollars, and as inflation rises and erodes the value of the dollar the cost of every ounce of gold in dollars will rise.

Trading recommendation: Buy 1711 and take profit 1750

#WTI:

The US oil and gas rig count fell 7 in the week ended June 10 to 199, rig data provider Baker Hughes said, as oil-focused rigs continue to be pulled from fields. US oil production averaged at 11.1 million b/d in the week ended June 10, US Energy Information Administration weekly estimates showed, down 2 million b/d from all-time high 13.1 million b/d in mid-March. However, the percentage of wells that will be profitable in a $35/b environment is not large. This is a positive signal for oil prices!

Trading recommendation: Buy 34.50 and take profit 38.88

#SP500:

FOMC directed the Open Market Trading Desk at the Federal Reserve Bank of New York to increase the System Open Market Account holdings of Treasury securities, agency mortgage-backed securities, and agency commercial mortgage-backed securities at least at the current pace to sustain the smooth functioning of markets for these securities, thereby fostering effective transmission of monetary policy to broader financial conditions. Consistent with this directive, the Desk plans to continue to increase SOMA holdings of Treasury securities at the current pace, which is the equivalent of approximately $80 billion per month. The Desk plans to continue to increase SOMA holdings of agency MBS at the current pace, which is the equivalent of approximately $40 billion per month. This is a positive signal for the stock market!

Trading recommendation: Buy 2925 and take profit 3120.