The disappointing statistics on US employment for August, the persistence of tension around North Korea, the growing risks of a technical default in the US, and the activity of central banks in the physical asset market allowed gold to continue its rally. Since the beginning of the year, the cost of precious metals has increased by 16.3%, and this does not seem to be the limit. According to the rating agency Standard & Poor's, the inability of the States to fulfill their obligations because of maintaining the current size of the ceiling of the public debt will have more serious consequences for markets than the bankruptcy of Lehman Brothers. Against this background, the assets of the safehaven feel like a fish in the water.
Gold performs these functions much better than the Japanese yen. From the middle of February, the latter fell against the basket of currencies by 1.7%, while the price of XAU / USD rose by 9%. In periods of heightened geopolitical, political, or other risks, investors flee to the yen, as it was, for example, after the earthquake of 2011. Nevertheless, when the conflict occurs in close proximity to Japan, it is difficult to imagine money flowing into this country. Precious metals offer much more, which explains its advanced dynamics over other assets-shelters.
Dynamics of gold and the Japanese yen
Source: Bloomberg.
It is curious that while speculators are building longs and fans of ETF products are not particularly believing in an uptrend in XAU / USD, central banks are buying up the physical asset. The most active is the Bank of Russia, which in the first half purchased 101 tons and added another 14 in July. The consulting company Metals Focus forecasts that by the end of 2017, the aggregate volume of purchases of regulators will exceed 350 tons.
Gold finds support from those who do not believe in raising the rate for federal funds of investors. The futures market estimates the chances of a December monetary restriction of 42%, and if the Fed does not really tighten monetary policy in 2017, the US dollar will continue to be under pressure. In addition, in conditions of low inflation (the personal consumption expenditure index rose by 1.4% in July), the real yield of US Treasury bonds is actually falling, which is a bullish factor for XAU / USD.
However, if the tension around the Korean peninsula disappears, and the problem of the ceiling of the national debt will be quickly resolved, the bulls on gold can quickly lose ground under their feet. According to US Treasury Secretary Steve Munchina, the allocation of aid to the victims of hurricane Harvey states increases the likelihood of an increase in the debt limit. With Pyongyang, everything is much more complicated, but most investors continue to believe that wars can be avoided.
Technically, the return of precious metal quotations to the borders of the previous upward trading channel was a confirmation of the strength of the bulls. They are serious about storming the resistance area of $ 1345.8-1351.7 per ounce. Success in this event will enhance the risks of continuing the upward trend in the direction of $1375 and $1385. Failure, on the contrary, will create prerequisites for consolidation in the range of $ 1300-1350.
Gold, daily chart
