26.09.201900:39 Forex Analysis & Reviews: Gold does not like the president

The worst dynamics of business activity in the manufacturing sector in Germany over the past 10 years, the fastest decline in the consumer sentiment index in the US since the beginning of the year and rumors about the impeachment of Donald Trump - what could be better for safe haven assets?. The frank and the yen grew steadily, Treasury yields collapsed, and bulls on gold resumed attacks aimed at updating the 6-year high. The precious metal is preparing to close in the green zone for the fifth month in a row, and we must admit that it has reason for this.

When the leading economies of the world in the form of China, Germany and the US slow down, and central banks try to save the situation by easing monetary policy, the bulls on XAU/USD feel like a fish in water. Monetary expansion weakens major world currencies, and even the growth of the USD index does not scare fans of gold: it is not the dollar that is strong, its competitors are weak. Moreover, the Fed is cutting rates and, according to TD Securities forecasts, in order to eliminate the crisis in the money market, it will revive a program of quantitative easing in the amount of $515 billion in October. At the same time, political risks increased in the United States due to rumors about the impeachment of Donald Trump, which will contribute to the loss of steam by the US economy and global GDP. Is it any wonder that the treasury bond yields dropped sharply?

The dynamics of gold and yield on US Treasury bonds

The fact that the bullish XAU/USD trend is stronger than ever is evidenced by an increase in stocks of specialized exchange-traded funds to a 6-year high and an increase in Swiss precious metal exports to Britain to 112.5 tons, which is the highest value for the last 7 years . As a rule, when gold flows from the West (US, Britain) to the East (China, India), sellers dominate the market; when it changes its direction - buyers. Switzerland serves as a transit point and a kind of indicator of the activity of investors and jewelers. As for ETF reserves, they reached the level of 2494.3 tons and are ready to mark the best quarterly growth from April-June 2016.

Yes, the impeachment of the current head of the White House seems unlikely, but it undermines the political authority of Donald Trump and unties the hands of China. It is possible that China will continue to pull the cat by the tail, sincerely hoping that the main enemy could resign himself long before the presidential election of 2020. The October talks in Washington and Beijing may not be as productive as financial markets expect, which will lead to the development of a correction on US stock indices and will allow the bulls to develop an attack on XAU/USD.

Technically, the inability of the bears for gold to keep quotes below the trend line of the Burst stage of the "Bump and Run Reversal" pattern indicates their weakness. The precious metal quickly returned to the game and if the September high is updated, the AB=CD pattern will be activated. Its target of 161.8% corresponds to the mark of $1600 per ounce.