The gold is waiting for clues on the dollar




Gold has been able to reduce its losses and trying to hang on to an important level of $1,280 per ounce on the background of the reluctance of dollar bulls is the strength of the upcoming events of the announcement of the results of the FOMC meeting, the details of the tax reform and the dissemination of data on the us labor market. The support of XAU/USD has the uncertainty associated with the choice of a new head of the Fed. Investors are 70% Jerome Powell is the choice, but if they win back the remaining 30% and the seat is taken by John Taylor and Kevin Warsh, then the dollar index will climb laterally to the precious metal fans.

The performance of the rallies of the obligations of the us Treasury and the US dollar became the main driver of the weakness of gold in October. Macroeconomic data on the united states has continued to improve, hopes for the implementation of the tax reform turned into a bond, while reducing the degree of geopolitical risks, deprived of the precious metals from its necessary support. In the third quarter, the U.S. GDP has shown a resilience to natural disasters and accelerated to 3% q/q, which has pushed up stock market indices, the improvement in global appetite for risk and led to large-scale selling of places of refuge for the assets. At the same time, the XAU/USD bulls are under pressure because of expectations on the implementation of the budget reform. Reduction of tax rates will potentially lead to an increase in consumption and investment. As a result, the u.s. economy will grow steadily by 3%, while the average value since the financial crisis is only 2.2%, and growth of 3% and more than two consecutive quarters, which has occurred only 3 times.

In this scenario, the acceleration of inflation and will start to come out of the Fed control. The Central Bank will need more aggressive tightening of monetary policy, which is currently expected by the FOMC forecasts. The dollar will regain its authority, and the gold will become a pariah. However, not all investment banks and companies to adhere to this point of view.

TD Securities draws attention to the fact that, in 1984-2012, against the backdrop of the growth of the national debt, the price of precious metals have also increased in line with the GDP of the united states. The increase in the budget deficit and the public debt worsens the financial position of the largest economy in the world, raises the risks of default and supports gold and silver. As a result, they may grow to $1360 and $20 by the end of 2018.

The dynamics of the precious metals

Source: Bloomberg.

One of the bulls for XAU/USD, Mitsubishi Bank also relies on the uncertainty. Depending on the lender, these last few months indicate that the changes in the legislation are not given in small quantities, and, in mid-December, the question of the ceiling of the national debt must be resolved, which will return the object of the attention of investors from the second dekad of November. These factors allow us to count on the rapid return of gold above the psychologically important mark of $1300 per ounce.

Technically, the precious metal is traded in the framework of the consolidation in the range of $1260-1280. A breakthrough its upper limit, and the diagonal of the resistance is going to increase the risk of growth of the price to $ 1295-1300. On the contrary, effective support for test of $1,260 per ounce will pave the way to a target of 200% for the AB=CD pattern.

However, the daily chart



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