Tickmill
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Gold has solid prospects to set up a sustainable rally.

FX_IDC:XAUUSD   Gold Spot / U.S. Dollar
So, yesterday Trump decided to mix the tedious efforts on second-guessing the Fed's messages with a good bearish signal. It was a simply move: disbanding the advisory councils on investment matters and refusing to create new ones. Obviously, he himself can not figure out how to put up money on government scale, so as a result we have shifted timing for the implementation of large-scale programs. According to a new leg of bearish superiority, plans will be postponed for a long time. Probably until Trump comes to the realization that the presidency consists entirely of compromises and negotiations, and sometimes concessions with far from obvious benefit.

The news, of course, knocked the buck, which was almost started to return lost after the bullish comments of talking heads from Federal Reserve Bank. The index sank by 0.25%, almost the same amount was added to the EURUSD pair. The defeat was observed in other major pairs and even with the participation of some EM currencies. The reasons for the failure of the US currency include geopolitical instability, which was only partially forgotten, but was gladly returned to the game. The reason was the news that the US completely abandoned the idea not to conduct military exercises with South Korea, intending to further probe the verge of patience of the North Korean leader. Which, by the way already on the verge.

"To think twice" before buying the dollar, investors forced the words of Robert Kaplan, a Fed official, who noted that a three-time increase in the rate still returned the yield of 10-year bonds to 2.2% .Approximately as much yield on these bonds was in November 2016. There are two interpretations from the Kaplan: the outflow of capital to other countries (including the eurozone) on the expectations of accelerated economic growth or growing pessimism about its own economy (the US). However, it seems to me with the coming of Trump to power (or even slightly before it), the market promptly laid down accelerated terms for raising the Fed's rates, which resulted in an increase in the yield from 1.77% to a peak of 2.6%,. The markets just played out ahead and the yield is higher and may well be on its fair level. This is why the hawkish deviation of the Fed is too early to be discounted, even though the chances are falling.

Anxiety in the market has increased with a terrorist attack in Barcelona which killed 13 people and injured about 100. The terrorist sent the truck to a group of people, a similar method was chosen in the terrorist attack in France earlier this year. Asian markets set a negative tone, which picked up European stocks and most EM. December gold futures soared to $ 1,300, but growth is likely to be followed by correction, as the search for high yields will gradually withdraw investors from the safe heavens.



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This analysis is provided as general market commentary and does not constitute investment advice.
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