14.11.201900:55 Forex Analysis & Reviews: Gold has lost its luster

Strong dollar, S&P at record highs, yield on 10-year US Treasury bonds approaching 2%. What could be worse for gold? The stars came together for the "bears on XAU/USD amid the de-escalation of the Washington-Beijing trade conflict and investor belief that disordered Brexit could be avoided. The decrease in geopolitical tensions, the synchronization of the process of monetary expansion and the signs of a cyclical rise in global GDP make JP Morgan get rid of precious metals. This bank is not alone. Citigroup told its customers that it was stepping out of long positions, and TD Securities believes that the correction may continue up to $1438 per ounce.

The week of November 8 was the worst for gold since 2017. It lost about 3.6% of its value on reports that the US and China are going to roll back tariffs in order to sign the deal under Phase 1. Investor sentiment dramatically improved, risk appetite increased. This has led to massive sales of safe haven assets. At the November 8 auction, the outflow of capital from the largest specialized exchange fund SPDR Gold Shares amounted to $620.7 million, which is the most serious indicator since October 2016.

Capital Flow Dynamics at SPDR Gold Shares

Sensing the smell of getting fried, they dump gold off of their hands. In the week of November 5, they increased their short positions in precious metals by 15% to more than 31 thousand contracts, the highest level since the beginning of June. Net longs fell to a two-week low.

The dynamics of speculative positions and gold prices

Donald Trump managed to suspend the correction. At a meeting of the Economic Club in New York, the US president threatened China with substantially higher tariffs than now if it does not sign the agreement. Uncertainty in the relations between Washington and Beijing remains, but whether it will become a saving straw for the bulls at XAU/USD. So far it looks doubtful. Stock indices firmly believe in ending the trade war and ignore impeachment news. The yield on Treasury bonds is growing due to a decrease in the likelihood of a recession, and the pause in the process of easing the monetary policy of the Federal Reserve supports the dollar.

Jerome Powell's rhetoric during his speech to the US Congress is unlikely to significantly change since the October FOMC meeting. Since then, employment and the trade balance have added optimism to dollar fans, and hawkish speeches are increasingly being heard from Fed officials. The presidents of the Federal Reserve Bank of Atlanta and Philadelphia, Rafael Bostic and Patrick Harker, would increase the number of dissidents in the matter of reducing the federal funds rate to 1.75%, if not for rotation. Boston Fed Chairman Eric Rosengren and Fed Vice Chairman Richard Clarida talk about the central bank's limited capacity to deal with a potential recession.

Technically, the exit of gold quotes beyond the lower limit of the consolidation range of $1475-1515 per ounce naturally led to the development of a correction to an upward trend. The $1,475 retest may end with the formation of the Expanding Wedge pattern or a new wave of sales in the direction of the target by 78.6% according to the Gartley pattern.