Speculators Expect Gold Rise | 02 June 2017

Forecast for the week from May 29 to June 2:

XAU/USD:

Uptrend on gold is ramping up. There two major causes of quotes increase. First of all, XAU/USD is in demand because 10-year US Treasury Bonds yield has exceeded US inflation rate. Another US Consumer Price Index release is scheduled only on middle June, so gold may close last spring month on a positive note. Second cause is increasing geopolitical tension. Investors only recovered from Trump impeachment to face explosion in London. According to CFTC net speculative positions number increased by 33.1 thousand contracts last week, which is the highest growth rate in three months. It confirms bullish advantage. Trading Recommendation: Buy 1263/1254 and take profit 1274.

Brent:

Oil closed last week in red zone after two-week growth. We believe, that it's correction and soon we will see uptrend again. Why quotes dropped? Media say that investors supposedly disappointed with OPEC summit outcome. We disagree to that, as OPEC summit went on a positive note. Participants agreed to maintain current oil output till April 1, 2018. Initially, investors expected six-month agreement extension, and got nine-month one. This measure will be enough to bring world's market to balance at the end of this year.

Of course, seasonal US demand cannot be ruled out. Oil inventories have been reduced 7 weeks in a row (total reduction is 19.2 million barrels), and this dynamics is likely to continue. US traditionally shows high GDP growth in second and third quarter, which has positive impact on oil products demand. Trading Recommendation: Buy 52,05/50,88 and take profit 53,90.

S&P500:

Open Sell positions for two reasons. First of all, VIX is approaching its 23-year low again, which is a negative factor for American stock market. Last week S&P500 renewed its historical high, along with that Dow Jones Industrial and Dow Jones Transportation indices didn't show any considerable growth and didn't manage to set new records. Such a divergence indicates that market is ready to reverse. We may expect either correction or significant quotes drop. We believe that correction is more likely to happen, as there is no reason for panic in American stock market. Second of all, we are observing safe assets strengthening, which will have negative impact on S&P500. Speculators are ramping up positions on gold and Japanese Yen, that leads to reducing of carry trade operations' volume. According to CFTC net speculative positions number reached its lowest in three months, which also confirms lack of strong uptrend potential. Trading Recommendation: Sell 2416/2425 and take profit 2393.