Gold chose a favorite

Gold has long been tormented, suffering between the largest drop in US stock indices in the past 6.5 years and the decline in the yield of US Treasury bonds. Moreover, the dollar is strengthening. Ultimately, the last factor won, forcing the quotes of the XAU / USD pair to collapse to four-week lows. Impressed with strong statistics on the US labor market, bears in precious metal went on the attack amid growing rumors of an aggressive monetary restriction of the Fed.

In 2018, gold broke more than one correlation. And if in previous years it reacted sensitively to the rates of the US debt market, now the decline in profitability is perceived as information that given the worsening global appetite for risk, treasury bonds appear to be a more serious saving port than precious metals. There are rumors that the reluctance of the XAU / USD pair to go north indicates that the correction of the S & P500 will be shallow. This happened against the background of the first take-off since August 2015 of the index of fear VIX above the 50 mark. In my opinion, the dollar is to blame for everything, which at the turn of 2017-2018 ignored a lot of "bullish" factors for itself, forcing gold to rise in parallel with the increase in the likelihood of monetary tightening of the Fed in March from less than 60% at the beginning of this year to 78%.

On the wreckage of old relationships there are often new ones and the fact that gold pays attention to the USD index and ignores the American stock markets allows one to look closely at its correlation with European stock indices. If it continues to work, the problems with the creation of a coalition in Germany, the Italian parliamentary elections, and and the weakened revaluation of the euro, corporate reporting by the issuers of the Old World can serve the bulls for XAU / USD a good service.

Dynamics of gold and EuroStoxx600

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Source: Bloomberg.

However, according to Standard Chartered, in the near future, gold may move to medium-term consolidation. Firstly, the upward trend can not last indefinitely because it needs a pause. Secondly, if in January the inflow of capital into precious metals-oriented ETF significantly accelerated (+32 tons) compared to the dull fourth quarter (+10 tons), now it is slowing down again. Without the support of investment demand, the "bulls" for the XAU / USD will find it difficult to reach the psychologically important level of $ 1,400 per ounce mark.

Gold can be supported by the growing risks of the repeated disconnection of the US government and the aggravation of trade relations between Washington and Beijing. The Celestial Empire filed a complaint with the World Trade Organization on the unilateral introduction by the States of duties on the import of solar batteries and washing machines. When Canada did the same thing not so long ago, the American administration was outraged. If Congress does not extend government funding for six weeks by February 8, fears of a slowdown in the US economy could help fuel demand for safe haven assets.

Technically, after reaching the target by 113% on the pattern of the "Shark", the risks of a rollback to $ 1309-1316 and $ 1310 per ounce would increase.

Gold, daily chart

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