Hard times for metals | 25 September 2015

Forecast for the week September 21 - 25:

XAU/USD:

Decision of the US Federal Reserve not to change its monetary policy on September 17 rendered a short-term support to gold, as the US dollar is now being sold. However, in the coming week, in my opinion, we should expect development of the downward trend in precious metals. Firstly, inflation expectations in the US and Euro zone are weaker, which is a negative factor for the "yellow metal". US Federal Reserve at the end of its last meeting reduced its forecast on CPI for the current year from 0.7% to 0.4%. From 1 January to August 31, inflation in the US hd been on the level 0.69%. Thus, Fed Reserve expects main inflation to reduce to the end of the year by 0.29%. The main factor that will exert a downward pressure on prices is the "bearish" trend in the oil market. From the beginning of the year, August was the first month when Euro zone's inflation was recorder negative, prompting the vice-president of the ECB Constancio V. tell about advisability of enhancing of the program QE. Last week, negative trend in inflation was mentioned by the Bank of Japan. Its spokesman Mr. Kuroda recommended to closely monitor oil quotations, because it is a source of uncertainty in respect to price stability. Second, the market of "black gold" can continue the downward trend. On Wednesday September 16th, the US Department of Energy published the report on reserves of crude oil saying that the driving season in the United States is coming to its logical conclusion, and soon we can expect a strong increase in stocks of refined petroleum products. During the first two weeks of September, the volume of gasoline reserves rose by 3.22 million barrels, but based on August results, they were decreased by 2.57 mln. barrels. Last week, crude oil reserves fell by 2.57 mln. barrels, but since beginning of the current month the index grew by 0.46 mln. barrels. In this context, decline of demand will put a pressure on quotations of the main categories of oil contracts, which in turn will reduce yield of the US 10-years' treasury bonds So, we should open Sell position growth of quotations to 1142/1156 and Take Profit around 1108.

XPT/USD and XPD/USD:

This week, the platinum group of metals will show a negative trend. Investors have already "played back" reluctance of the US Federal Reserve to raise interest rate. Chinese factor is negative for the industrial metals and the Federal Reserve was concerned with decline of the Chinese economy. China is the world leader in car production o and this sector provides a primar demand in both metals. China produces twice as many cars as its first rival - the United States. In this context, economic slowdown in China carries a high risk for the platinum group of metals. The leading indicator, PMI manufacturing scope of China for 6 consecutive months below 50% mark. According to results of the last week, Shanghai Composite lost 3.2% - more than leading stock indices of Asia, Europe and North America, confirming investors' pessimism about outlook of Chinese economic growth. Don't forget about negative dynamics of copper - this metal is widely used in manufacture and is a leading indicator for all industrial metals. Last week, copper quotations decrease by 3.3%, which is also negative for platinum and palladium. Lack of demand in copper indicates lack of interest in the platinum group of metals. In the middle of the week, we should open Sell position with XPT/USD on growth of quotations to 990/1010 and take profits at 960 and Sell XPD/USD on growth of quotations to 615/625 and Take profit around 584.

S&P500:

The coming week is not going to be as eventful as the past week was. On Monday, we can expect moderately positive data on house sales on the secondary market against increase of the average wage, as well as lowering of mortgages rates. The report on durable goods orders also can get a little better consensus forecast against increased car sales and positive dynamics on the labor and real estate markets. Nor can we ignore dynamics of the bond market: decline of yield of the 10-years' treasury bonds is also a positive factor for stock market. However, this week will not only provide positive factors. When results of the two-days' meeting of the US Federal Reserve were announced, investors in the US stock market began to switch to safer assets: stocks of utilities and consumer sectors. Investors are not ready to buy "risky assets", which is a negative factor for the stock market. Instability of the Chinese stock market may also exacerbate tension on the NYSE exchange This week we expect flat within the range of 1915 -1999.