23.01.201913:47 Forex Analysis & Reviews: Gold requires the continuation of the banquet

The strengthening of the US dollar against major world currencies forced some of the bulls on XAU / USD to take profits on long positions, but the correction turned out to be short. Gold is ready to return to the trading range of $ 1285-1300 per ounce, a break of the upper limit of which will increase the risks of continuing the rally. However, the same rapid growth as in December in the near future can hardly be expected.

The dollar was able to benefit from maintaining the IMF's unchanged forecast for the US economy for 2019-2020, while the GDP estimate of many eurozone countries, including Germany, Italy, and France, was downgraded. Traditionally, the USD index goes up, if the growth rate of the American economy is ahead of the global figure for developed countries. In this regard, the suggestion of the International Monetary Fund that the latter slow down from 2.3% to 2% in 2019 and to 1.7% in 2020 became a catalyst for the EUR / USD peak and weakened gold for a while. At the same time, interest in the products of specialized exchange-based funds remains high, their reserves increased to 2,253.2 tons, the maximum level since April 2013, which creates a solid foundation for the upward movement of the precious metal.

XAU / USD plays into the hands of the bulls and the gradual closing of speculative shorts in gold, as a result of which the net positions of hedge funds were able to return to the green zone.

Stocks gold ETF and speculative net positions in gold

Breaking above the analyzed asset does not give optimism to the financial markets about the outcome of the US-China trade negotiations. Rumors about the desire of Donald Trump to make a deal, the statement of Steven Mnuchin that the abolition of tariffs will allow it to be done quickly, and the US President's hints on progress are positively perceived by stock indexes. Their stabilization puts sticks in the wheels of the "bulls" at XAU / USD, because the collapse of the S & P 500 at the end of 2018 allowed them to conduct a rapid attack.

The USD index is supported not only by the weakness of the main competitor of the dollar in the face of the euro but also by an increase in the likelihood of the Fed's monetary restriction cycle in 2019 from 12% to 25%, according to CME derivatives. Markets understand that they may have misinterpreted the pigeon rhetoric of the Federal Reserve. In fact, the central bank left the door to raise rates openly. Frankly, the realization of this fact, paired with the disappearance of fear about the global recession, complicates the path of gold to the north. Investors are convinced that in conditions of strong consumer spending and business investment, as well as the strongest labor market in recent decades, the world economy is a soft landing and not a recession. This increases investor interest in risky assets and is a moderately negative factor for the precious metal.

Technically, the inability of the bears to keep gold below $ 1,285 per ounce indicates their weakness and increases the risks of activating the Cheat-Outlier pattern, followed by the continuation of the northern campaign. To do this, the "bulls" will have to rewrite the January highs.

Gold, the daily chart