Buy S&P500 and sell XAU/USD | 05 February 2016

Forecast for 1-5 February trading week

XAU/USD:

In January the precious metal was closed in “green zone” and it proved a consistent pattern, which we discussed in webinar. However, the reason for further optimism is sufficiently small. Firstly, in the first month, the yield on 10-year government bonds of G-7 showed a significant decline. The main outsider were US bonds, they decreased by 34 points. At the meeting held last week, the Fed and the Bank of Japan's monetary policy and monetary control, both reported a decline in short-term inflation expectations due to low energy prices. In this regard, investors have no need to hedge against inflation risks through the gold, which is a negative factor for the stock. You can not ignore the increase of "appetite for risk", which is also traditionally a negative effect on the value of gold, as the precious metal is seen by investors as a "safe haven." At this background, you had better open short positions with XAU/USD at 1124/1131 levels and fix a profit at 1098 level.

XPT/USD and XPD/USD:

During the week, we should expect the development of the side trend for platinum group metals. On the one hand, the demand for "risky assets", which is observed in the last eight trading days, is a positive factor for industrial metals. Current levels of both metals are in the area of multi-year lows, and this situation is attractive for opening long positions. On the other hand, the top three world leaders in car sales showed slowdown growth in 2015. And if China and the US increased sales by 7.3% and 5.7%, respectively, the Japanese showed the worst results - sales fell by 10.3%. It is worth noting that in 2014 the leading trio showed growth rate of 9.9%, 5.95 and 3%, respectively. Among the best-selling models in the world Toyota Corolla still holds the palm. Since the automotive industry makes it the main demand for platinum group metals, the slowing down of growth in car sales is always a negative factor for the stock of platinum and palladium. Thus, as soon as “risky assets” demand comes to an end, we will see downward trend at this metals charts. Against this background, we should expect the flat for XPD / USD within a range of 850 -900, and the flat for XPD / USD within a range of 480 -520.

S&P500:

During the week you had better open Buy position on pullbacks for three reasons. First, the leading US corporations demonstrate moderately positive quarterly reports, which can reassure the "bulls" to build up long positions. Such corporations as Apple, Johnson & Johnson, Procter & Gamble, Facebook for the reporting period to increase their profits, but decline in earnings calls into question medium-term corporate bonds. However, in the short term it is a positive factor for the stock market. Second, the yield 2-year US government bonds, which reflected expectations for Fed rates, last week fell by 10 basis points, as a whole in January the decline was 29 bp. This dynamic signals that the Fed will not raise interest rates at a meeting on March 16, which is also a positive factor for the stock market. Third, the last day of January, the Bank of Japan introduced a negative interest rate, which can help to increase the carry trade operations on the cheap liquidity background. This is also a positive factor for the "risky assets". Against this background, you had better open long positions on S&P500 at 1925/1905 levels and fix prices at 1955 level.