New Heights for Gold and Oil | 20 October 2017

Forecast for the week from October 16th through October 20th:

XAU/USD:

Gold closed the previous trading week with a confident rise, and the main factors point to the tendency continuation. First of all, we are observing US dollar developing correction, which supports gold, as these two instruments have inverse relationship. Second of all, G-7 economies are experiencing increase of inflation expectations, which also gives bulls advantage in gold trading, as gold is traditionally used as inflation protection. I believe we are likely to see gold rise for four trading days and then profit taking on long positions on Friday. Trading signals: Buy 1299/1290 and take profit 1320.

Brent:

Buy oil for two reasons. Firstly, Saudi Arabia is to reduce oil export by 0.5 million of barrels starting from November 1st, this is great news for market. Why Saudis are willing to do this? We believe it's all the matter of upcoming IPO of Saudi Aramco, which is scheduled on 2018. In order to sell 5% of shares at high price, Saudis need high oil prices. For this reason Saudi Arabia is going to take steps to continue oil market uptrend. Secondly, USA oil inventories and output are dropping, which is positive for oil prices, as USA is the world's largest oil products consumer. Trading signals: Buy 56,20/55,11 and take profit 57,85.

S&P500:

American stock market is trading almost at its historical high but investors optimism is not dropping. Previous week saw the start of traditional earnings season. As usual, such banks as Citigroup, JPMorgan, BlackRock and Bank of America were the first to report the increase of revenue and net profit. This week there are several reports worth attention: Goldman Sachs, IBM, Morgan Stanley, Verizon and Procter&Gamble. Based on the strong quarterly ISM Manufacturing and Non-Manufacturing indexes data the reports listed above are likely to be positive, which will support S&P500 index. Trading signals: Buy 2552/2540 and take profit 2573.