The reduction in the level of geopolitical risks, the growth in yield of U.S. Treasury bills and the strengthening of the dollar has made gold notch three days of declining prices. The precious metal has returned to the weekly low, and judging by the growth of the likelihood of tightening of the Fed monetary policy in December to 93%, this is not the limit. According to TD Securities, for the return of contracts quotations above the psychologically significant $ 1,300 mark for an ounce, the weakness of macroeconomic statistics in the united States is necessary. To the disappointment of the «bulls» for XAU/ USD, it continues to please the fans of the AMERICAN dollar.
In September, import prices accelerated from 2.1% to 2.7%, which is the indicator of the best performance since the month of June and also increases the chances of further standardization of the cycle of the monetary policy of the Fed. If the FOMC really have to worry about inflation, then an increase in the rate of its growth, should give confidence in the need to raise the federal funds rate. The situation with GDP is not worse. The pessimists have been concerned about the economic downturn under the influence of hurricanes, however, judging by the industrial production (+0.3% m/m in September), things are not as bad as what they were supposed to be. Hopes for the acceleration of inflation and of the GDP, including through the implementation of the tax reform, the performance of U.S. Treasury bills, which is a «bearish» factor of gold.
The dynamics of the yield on the 10-year US and the gold of the obligations
Source: Trading Economics.
The precious metals can not cling to the improvement of the conditions of the market for physical assets. Purchasing assets on the eve of the feast of Diwali, the feast of the wedding allow us to predict the growth of gold consumption in India. For 9 months, the indicator has reached the level of 700 tonnes, 5% more than last year’s value. Despite the strengthening of the us dollar and the increasing risk of a downturn in the XAU/USD, the outflow of capital from the ETF in October, according to Commerzbank research, has remained modest (4.6 t). Alas, but above all are highly dependent on the demand for a physical asset «bulls» for XAU/USD is not worth it: traditionally, in the period of falling prices, it is increasing in the jewelry business and decreases in the area of investment. Simply put, the demand follows the price, but not vice-versa.
The gold may be supported by uncertainty. The information that the diplomats of North Korea and the united States can meet in Russia has reduced the level of geopolitical risk. Nevertheless, the conflict has not been solved yet. As, strictly speaking, the question of Catalonia has not been resolved. There are certain difficulties in the process of negotiation between London and Brussels, more than «brexit», as well as the risk of contracting the weak government in Japan after the early elections. These factors may put pressure on the yields of u.s. bonds and the return of buyer interest in XAU/USD.
It should be noted that, at the head of the Fed, most likely, will be Jerome Powell, who adheres to the policy of gradual normalization. Its implementation has allowed the precious metal to add 11.5% since the beginning of the year.
Technically, the break of support at $ 1 262-1 267 per ounce of increase the risk of activation of the model AB = CD. It aims to 200%, near the $ 1212-mark.