Gold: one step back, two forward

The Bears are trying to return gold to the trading range of $ 1,185-1,215 per ounce, armed with market concerns about the escalating trade conflict between the US and China and the growing risks of hawkish rhetoric by Jerome Powell. Despite the fact that the derivatives market reduced the likelihood of three increases in the federal funds rate in 2019 from 18% to 12% and expects the indicator to grow only by 2.73% by the end of next year, which is equivalent to one act of monetary restriction, speculators are in no hurry to sell the dollar. It is strange if it were otherwise on the threshold of the December meeting of the Fed, at which, most likely, monetary policy will be tightened.

An additional driver for strengthening the USD index is reducing the chances of a settlement of the trade conflict between Washington and Beijing after the meeting between Donald Trump and Xi Jinping in Buenos Aires. If, for the first time in 29 years, the Asia-Pacific Economic Cooperation Summit could not sign a memorandum, then why should the G20 do it? On the eve of the fateful meeting, the White House owner threatened to increase import duties on goods from China by $ 267 billion. His main economic adviser Larry Kudlow claims that in the absence of a breakthrough, tariffs from January 1, 2019, will increase from 10% to 25%. How does China feel in this situation? Is he ready to become a vassal of the United States?

For most of the current year, the trade wars supported the American dollar, which took the status of a safe-haven from gold, the Japanese yen, and the Swiss franc. Investors fled to US Treasury bonds, while the Chinese ambassador to the United States doubted that sales of treasuries would be used by Beijing as a weapon in a trade conflict. Let me remind you that in early 2018, the rumors that the Celestial Empire was getting rid of American papers, inflated their profitability and weakened the position of the dollar.

Despite the short-term weakness, gold is optimistic about the future. For example, Goldman Sachs recommends buying precious metal as one of the TOP-20 strategies for 2019. A decline in US GDP growth, a slowdown in inflation, and a speed at normalizing the Fed's monetary policy will put pressure on the US currency. Indeed, as oil prices fall, inflationary expectations fall, which may force the Federal Reserve to slow down the rate hike process.

Bloomberg Commodity Index and Inflation Expectations in the USA

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Pressure on gold exerts a deterioration in the physical asset market. Chinese net imports of precious metals from Hong Kong in October decreased to 29.6 tons, which is 36% less than in the same period last year. For 10 months, the figure fell by 22% y / y to 439 tons. However, Goldman Sachs is confident that active purchases of central banks level this negative factor.

Technically, the inability of the bears to return the quotations of gold futures to the limits of the trading range of $ 1,185-1,215 per ounce will be evidence of their weakness. To resume the rally "bulls" need a confident test of resistance at $ 1230.

Gold, the daily chart

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