The renewal of the October low will increase the risks of the continuation of the southern campaign of the XAU / USD pair. The «bears» are inspired for XAU / USD to new attacks because of the victory of Shinzo Abe’s party in parliamentary elections in Japan, the departure in the shadow of the North korea question, the strength of the dollar and the growth performance of the obligations of the U.S. Treasury. Sellers of precious metals are seriously updated the October low near the mark of $1260 for an ounce and continue the pic to the psychologically important$ 1,200.
Gold has not been able to compete with income-producing bonds. On one side, the strengthening of the dollar results in an increase in the cost of imports into the country, which includes the main consumers of physical assets. In this regard, the rate of growth of 10-year debt obligations to the maximum possible score for the last 7 months and the dollar index for the month of August summits are serious arguments in favour of the sale of the XAU/USD pair. In addition, the world of stock market indices are not tired of the rewriting of records. Therefore, the democracy of the liberal democrats in Japan helped the Nikkei 225 index to reach a 21-year high, which contributes to the growth of the USD / JPY at the level of 114. The market is in search of a safe haven for their assets among the conditions of the decrease of the uncertainty in the country of the Rising Sun, and the de-escalation of the conflict in North Korea. They were aggressively removed, which increases the risk of further precious metals to the south of the trend.
The dynamics of the USD / JPY and gold
The strengthening of the dollar and raise the rate of the u.s. debt market is supported by the new UNITED states in virtue of which, it has greatly increased the chances of achieving tax reform after the adoption of the draft budget for the next fiscal year. It is capable of dispersing the american economy to 3% or more, which increases the likelihood of a more rapid tightening of the monetary policy of the Federal Reserve in 2018. The market is almost convinced that the Central Bank will increase the rate on federal funds in December. Therefore, it will continue to be under pressure before the end of the year.
The future will depend on the advice of the derivatives market on the future rate path from the Fed. Currently, the derivative products should be 1.8% by the end of 2018, which involves two acts of currency restriction. Nevertheless, the indicator can move to 2.3% (4 acts) if the head of the Fed is supported by Kevin Warsh, and John Taylor, according to Nordea research. In the short term gold may respond to the winning chances of Janet Yellen, or Jerome Powell, but the recovery of the S&P 500 index rally gives the potential of the correction bullish for XAU / USD limited.
Thus, there are «bearish» sentiments in the precious metal market, but there are also optimistic. In particular, the Bank of Russia has purchased 34 tons in September, which was the most severe since the month of October 2016. At the end of 9 months, 163 tons were purchased, and the total value of the gold reserves has increased to 57.2 million ounces.
Technically, the inability of the bulls in gold to keep the quotes above an important level of $ 1,280 per ounce is an indication of their weakness. In case of an update of the October low near the $ 1260 mark, the pattern AB = CD with a goal of 200% will be enabled. It corresponds to the area $ 1210-1215.
However, the daily chart