Forecast for the week 10 - 14 July:
This week the mixed background is expected. On the one hand, we can expect growth of yellow metal as USD will fall. USD and gold have a strong opposite correlation. Since the pace of the average salary growth is dropping, surge of inflation is not expected and FED's is not expected to raise the rate. Thus, US dollar will have no support and this factor will play in bulls' hands on gold. .
On the other hand, on the stock market we can expect the uptrend this week. This will male the capital outflow from safe assets, which gold is referred to. Growth of indexes ISM on service sector and manufacture are telling that we can expect positive quarter reports of US corporations. Therefore, based on all above-mentioned facts, we can expect an upward correction on gold if the psychological level 1200 is passed. Trading recommendation: Buy 1200/1190 and take profit 1229.
We shall buy oil because of the two reasons. First, US oil stock are dropping dramatically and even anticipate expectations of the market players. This summer the worldwide and US oil demand will be high. This is proved by surge of business activity indexes in US, Europe, Japanese manufacturing sectors. Only China shows the slowdown of the manufacturing sector – the average PMI index of the second quarter is on the borderline 50,1%. The drop under 50% shall mean recession. Of course, there is a risk from the side of China, but we cannot disregard growth in three largest economies. Secondly, in its regular weekly review, the oil service company Baker Hughes reported about drop of number of vertical US drill rigs by 3. This particular type of rigs accounts for the biggest oil production in the Nortern America. Based on this, we can expect slowdown of oil production which will boost price of oil. Trading recommendation: Buy 46.99/46.22 and take profit 48.75.
This week US corporations will publish their reports. The first releases will be published by the largest banks - JPMorgan and Wells Fargo - on Friday, 14th. Investors expect positive reports because of growth of margin boosted by tougher credit policy conducted by FED's. For the second week in a row, both credit insitutions have been demonstrating a sustainable growth. By the way, W. Buffet's portfolio is holding a notable share of Wells Fargo. In general, based on positive statistics on business activities in the manufacturing ans service sectors from ISM, the most corporates are expected to report positively. It can take S&P500 to a new historical High. Trading recommendation: Buy 2424/2405 and take profit 2351.