Have you Bought Gold? | 30 Juni 2017

Forecast for the week June 26 through June 30:

XAU/USD:

There are two reasons to buy gold. First of all, 10-year American Treasury bonds yield is still above inflation rate in USA (difference is 0.25%), which has a positive impact on gold. Investors traditionally buy gold when such spread is observed in the market. The second reason is seems to be in changes of sentiment in market. In 2015-2016 were excited about US dollar as GDP grew at robust pace, and Fed raised interest rate as inflationary expectations grew. Now inflationary expectation are falling and American Central Bank may take a break in monetary tightening. Chicago futures exchange, the one that is good at forecasting FOMC rate hikes, stated that the next rate hike may occur only in summer 2018. Pessimism of traders regarding Fed rate decisions will have a negative impact on US dollar price, and as you know US dollar and gold have inverse correlation. Trading recommendation: Buy 1253/1241 and take profit 1264.

Brent:

Oil has been falling five trading weeks in a row and may traders ask themselves a question whether it's a correction following strong rise in 2016 or a new downtrend? Articles began to appear about new oil market crisis. Some experts of Wall Street respected banks predict oil to fall to $10 per barrel. What will happen to oil? We believe that oil is to rise both in short and long term. Considering that our review concerns the last week of the second quarter, we will speak about short term perspective. The first driver of oil prices rise is growing business activity in manufacturing sector of Eurozone, which is now at its highest since May 2011. ECB is boosting economy by zero interest rates and bonds purchase, which together with weak euro pushes manufacturing sector to the upside. We believe that oil products demand in Eurozone may be expected, which will be good for oil prices. The second driver is OPEC verbal interventions. Last week the organization announced the possibility of reducing oil output in autumn, if prices will be falling. OPEC in general and Saudi Arabia in particular is not satisfied with current oil prices and is ready to take bold steps. Trading recommendation: Buy 45,65/44,20 and take profit 47,77.

S&P500:

For the last two weeks American stock market trades in flat, and now there are no cause for tendency change. To force market to the upside we need drivers and strong macroeconomic statistics that will make investors believe that shares are worth to buy despite of two Fed rate hikes renewed historical high of Broad Market Index. However, there is no such statistics yet. Meanwhile, USA Treasury bonds yield in the second quarter has fallen by 0.25%, so S&P500 is unable to sink far down, as shares benefit from reduction of bonds yield. Trading signals: flat 2420 -2460.