Buy Gold and Oil | 09 June 2017

Forecast for the week June 5 - 9:

XAU/USD:

Gold has closed forth week in a row in the green zone and uptrend is ramping up. Now it's not the best time to sell precious metal hoping for strong correction. Positions might be closed but downtrend would be only temporary. There is one main reason of gold strengthening, it's US dollar fall. Previous week USDX renewed its six-month low. Gold traditionally gets support when dollar quotes drop, as there is inverse correlation between these two instruments. This correlation is strong and lasts for decades already. According to CFTC speculators continue to ramp up long positions on gold but longs growth pace is slowing down, that means investors do not anticipate drastic XAU/USD strengthening. Trading recommendation: Buy 1274/1265 and take profit 1286.

Brent:

This week may see oil market close on a positive note for two reasons. First of all, PMI indices in G-20 states show uptrend, which indicates goods output growth. During such periods usually steady oil products demand is observed, which will have positive impact on oil prices. In USA car travel season has started, that will cause oil inventories fall in the largest world's economy. It is USA that uses more oil than any other country in the world, that's why its balance of the demand and supply influence greatly oil pricing.

Second of all, now we are observing US dollar quotes fall, that is positive for oil, which is quoted in dollars. USDX is now trading at its six-month lowest, and there are no reasons for US dollar strengthening so far. Trading recommendation: Buy 50,15/49,08 and take profit 51,80.

S&P500:

American stock market closed the previous week at its new historical high primarily due to Treasury bonds yield decline. When debt securities yield drop, investors move their capitals to stock market and vice verse. It's worth to mention that weak May employment statistics caused demand on safe assets, such as euro, gold and yen. That's why investors are likely to start profit taking on long positions at historical high level, which will cause rollback to the downside. Trading recommendation: Sell 2436/2445 and take profit 2410.