The data on the US economy released on Monday, which is the values of basic orders for durable goods and their volumes, were disappointing, but only gold quotes reacted to the negativity while the foreign exchange market habitually stood, and US stock indices continued the Christmas rally. Or is this not entirely true?
Indeed, basic orders for durable goods and their volumes in November fell compared to October values. Base orders were at zero against the expectation of an increase of 0.1% and, importantly, the October figures were revised down to 0.3%. The volume of orders fell by 0.2% against the forecast of growth by 1.5%. The October data was revised down to 0.2%.
And although the US stock market did not respond to this in any way, nor did the dollar exchange rate, gold turned out to be the indicator that responded to the data presented. Or is it still not quite so?
Since the beginning of this month, gold began to grow smoothly, and then fell into a weekly mode of waiting for a denouement in the negotiations on the so-called "first phase" between Washington and Beijing. Last week, Trump and the Chinese side announced the signing of the first phase of the agreement in January. This supported the quotes of the yellow metal, which began to grow weakly. This move was caused by a lack of transaction details and continuing fears that the expressive US president might change his mind again.
Moreover, interestingly, all the statements that the resumption of growth in the price of gold reflects precisely these fears do not find confirmation in the dynamics of other important protective assets. We do not observe a drop in yield in US government bonds, so the benchmark yield of 10-year Treasuries remains near a local high in early November and is not going to fall at all, neither in Japanese yen and Swiss franc quotes. So, it turns out that some other reasons push gold prices up.
There is an explanation that this is the topic of impeachment of Donald Trump by the US Democratic Party that supports prices, but it is not confirmed by the dynamics of other defensive assets and the movement of the stock market. Doubts that the latest data on America's economy are so disappointing that it makes investors fear for its objective growth in the fourth quarter, it seems, are also not significant.
In our opinion, there are two banal reasons. The first is the habitually thin market on Christmas week, when there is a unique opportunity to "move" the market to one or several large players in their interests. And the second reason, we believe, is the expiration of futures contracts on December 25 that helps to increase spot prices to futures in the interests of individual players in this market.
Of course, the beginning of active trading will show how right we were, but the reasons for the increase in gold prices that we have cited are indeed, most likely, these reasons, and not something else.
The material has been provided by InstaForex Company - www.instaforex.com