12.12.201815:18 Forex Analysis & Reviews: Gold plays by the rules of the Central Bank

Having reached a five-month high, gold failed to gain a foothold above the psychologically important mark of $ 1,250 per ounce due to strong statistics on American producer prices. In November, the base indicator accelerated to 2.7% y / y, which immediately brought back the idea of continuing the Fed's monetary policy normalization cycle in 2019 on the table. The day before, the derivatives market reduced the chances of a single increase in the federal funds rate to 49%, but strong PPI pushed them to the level of 57%. The dollar came to itself, which made the bulls in XAU / USD retreat.

Since mid-November, the main driver of the growth of the precious metal is the change in the worldview of the Fed. Jerome Powell said that the level of neutral interest rates is close, which led investors to doubt the realism of the September FOMC forecasts. Currently, the market is counting on one or two acts of monetary restriction in 2019 instead of three. Simply put, investors do not like the dollar because of the possibility of deterioration in the forecasts of the Central Bank in December. At the same time, Jerome Powell said that further decisions by the regulator will depend on the incoming data so that strong statistics on producer prices quite naturally led to the strengthening of the USD index.

Despite the retreat, banks represented by JP Morgan, BofA Merrill Lynch, and Commerzbank are optimistic about the medium and long-term prospects for gold. The precious metal may grow by 5% -15% in 2019 due to the slowdown in the process of monetary restriction of the Fed, difficulties in financing the US double deficit, falling stock indices and the yield of treasury bonds.

Dynamics of gold and yield of US Treasury bonds

Let's not forget about the favorable external background for gold. Despite the truce in the trade wars of Washington and Beijing, in 90 days it is fully capable of resuming. In addition, the uncertainty associated with the negotiations will keep the demand for safe-haven assets at a high level. The Italian budget crisis is far from resolved, and Britain risks plunging into the promiscuous Brexit. It is not surprising that in such conditions, stocks of specialized exchange-traded funds are growing. For the largest of them, SPDR Gold Shares, the figure increased to 763.56 tons, the maximum level since the end of August.

Further XAU / USD dynamics will depend on releases of data on US inflation, European business activity and on the outcome of the ECB meeting. The slowdown in CPI, Mario Draghi's confidence in restoring the eurozone economy despite current weak statistics and the gradual growth of purchasing managers' indexes will inspire EUR / USD bulls to attack, which will affect the USD index and gold. On the contrary, the acceleration of inflation, the weakness of PMI and the readiness of the European Central Bank to extend QE will strike at the main opponent of the dollar. The euro, which will force the precious metal to retreat.

Technically, the bulls leave no hope to realize a target of 200% using the AB = CD pattern. The situation is under their control, so it makes sense to use kickbacks to support at $ 1239 and $ 1230 per ounce for purchasing.

Gold, the daily chart