Gold is betting on Asia

Having reached a semi-annual maximum, gold entered a state of consolidation, preferring to take a breath amid uncertainty about the outcome of the US-China trade negotiations and the timing of the resumption of the US government, on the one hand, and the stabilization of financial markets, on the other. Investors at the beginning of the year seriously feared the global recession, but strong statistics on the US labor market, a slight reduction in World Bank forecasts and the Fed's willingness to pause in the process of normalizing monetary policy put a stake on the bulls in XAU / USD.

2018 was mixed for the precious metal. A strong US dollar, rising real yields on treasury bonds and sluggish Asian demand for physical assets for most of the year put downward pressure on prices. According to the unwelcome sources of Bloomberg in the government of India, imports in this country in 2018 decreased by 20% to 762 tons. The December figure fell by 23% y / y to 60 tons. The main reason is the devaluation of the rupee, which made gold overly expensive. However, according to Commerzbank, in 2019 we are expected to see an increase in imports amid increasing Indian interest in investments and a weakening US dollar.

Dynamics of Indian gold imports

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Interest in ETF products is increasing worldwide. The World Gold Council estimates the growth of stocks of specialized exchange funds of 76 tons in December. Commerzbank notes that since the beginning of the year, the indicator has grown by 18.6 tons. The fact that the People's Bank of China has increased for the first time since October 2016 its gold reserves up to 1853 tons, also gives optimism to the "bulls" on XAU / USD. In the conditions of the slowdown of the economy of the Middle Kingdom and the policy of protection of Donald Trump, Beijing prefers to reduce its dependence on the States and instead of treasury bonds, they buy precious metals. Russia and Turkey are following the same path, and other central banks may follow.

Gold dynamics and ETF stocks

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A potential increase in investment demand is by no means the only driver of rising gold prices. A pause in the process of normalizing the monetary policy of the Fed and the slowdown of the global economy are giving him a helping hand. If in 2018 the Federal Reserve has increased the federal funds rate four times, in 2019 it may even refrain from monetary restriction. As a result, the real yield of Treasury bonds and the US dollar will fall, and the XAU / USD quotes will go up. The World Bank believes that global GDP will slow down from 3% to 2.9% this year, the American economy from 2.9% to 2.5%, and the Chinese economy from 6.5% to 6.2%. Thus, it is not about a recession. There is a soft landing, but this factor keeps the yield of bonds around the world under pressure and contributes to the growth of the precious metal.

Technically, after reaching a target of 200% for the AB = CD pattern, the risks of a gold correction in the direction of 23.6% and 38% of the last upward wave increased.

Gold, the daily chart

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