The price of gold futures fell to its lowest level since the end of the month of August, in the midst of rising yields on US Treasury bonds and a probability of an increase in the federal funds rate in December, which proved to be 63%. The supporters of this precious metal are seriously concerned by the beginning of the process of the balance sheet, of which the chances of September increased from 51% to 71%. In 2008-2011, when the Fed has been actively purchasing assets under the quantitative easing program, the value of gold has increased 70%. It is unlikely that the anti-QE is able to cause a return to earlier levels, however it would likely appeal to the «door».
The «bulls» for XAU/USD have not been helped by the rising risks of a slowdown of the u.s. economy in the third quarter as a result of the publication of data on retail sales and news of the most severe verbal attack on North Korea by Donald Trump. The president’s promise to destroy a dangerous scheme (in the case of his attack on the united states and its allies) was taken quite calmly by investors. The markets have developed an immunity or are they waiting for Pyongyang’s response?
Let me remind you that the geopolitical risks, the low performance of U.S. Treasury bills and the dollar’s weakness has led to the growth of the speculative «bull» the rate of the precious metal to its highest levels since the beginning of the year (net position on the futures and options increased 6.1% in the week to September 12). Simultaneously, the largest stock exchange of the fund SPDR Gold Shares marked its fifth consecutive weekly inflows (+$177 million).
It is interesting to note that the risk of reversal (the ratio of the cost of the put and call options) on shares of this ETF have reached 2-year peak, which cannot be ignored when forecasting gold prices. According to TD Securities, precious metals may fall below $1,300 per ounce. FXTM believes that if this happens, then the price drop will sharply accelerate.
The dynamics of the risk of reversal of the securities SPDR Gold Shares
Thus, excessively inflated speculative positions, an increase in the risk of capital flows of exchange-traded funds, and the potential for the continuation of the US Treasury bond yield rally against the backdrop of an increase in the probability of tightening of the Fed monetary policy as well as the beginning of the balancing process provides a vulnerable position for the bulls on XAU/USD. At the same time, no one has cancelled the factor of the weakness of the dollar.
If the Federal Reserve has reduced the forecast for GDP, inflation, unemployment and the federal funds rate (which is probably due to the slowdown in retail sales and the index of personal consumer spending), the dollar index of the downward trend could continue with a new force, which will have a positive effect on the gold. However, in order to return to $1,350 an ounce, without rejecting the tax reform Donald Trump, the Congress has little chance of achieving it. I doubt that a new missile from North Korea would be able to be enough to restore the upward trend in the XAU/USD.
Technically, the «bulls» are trying to cling to the lower limit of the ascending short term channel. If they succeed, the chances of a second test of resistance at $1346-1352 will increase. On the contrary, leaving the price below $1300 per ounce will increase the risk of a correction of development in the direction of $1280 and below.
However, the daily chart