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A breath of fresh air after the release of data on the US labor market, gold once again loses ground under the background amid the escalation of the trade conflict between Washington and Beijing. China responded to US import duties with equivalent tariffs of $ 34 billion, which the White House did not like. The States are beginning to develop new measures in the field of protectionism. This time by $ 200 billion under 10%, which the Celestial Empire cannot answer the same. The fact is that Chinese exports to the US in 2017 exceeded $ 500 billion, and the US to China did not reach $ 200 billion. However, Beijing has other trump cards in its sleeve.

Dynamics of Chinese and US exports

Exchange Rates 12.07.2018 analysis

Theoretically, gold is in a favorable environment for itself, the more surprising its weak positions look. As an asylum-seeker, it must benefit from a trade war that potentially has to slow down the global economy. Acceleration of US inflation in the conditions of stubborn refusal to bet on 10-year US Treasuries exceed 3% leads to a fall in the real yield of Treasuries, which is a bullish factor for XAU / USD. Yes, there is a slowdown in Indian demand (imports fell by 40% to 343 tonnes in the first half of the year), but prices within the country are declining, and the seasonal factor testifies to their recovery by the end of summer.

The main driver of the peak of precious metal is a strong dollar. The divergence in the monetary policy of the Fed and the central bankers-competitors, including the ECB, as well as the high demand for the American currency due to the escalation of the trade conflict between the States and the Celestial led to the best quarterly result of the USD index since the victory of Donald Trump in the presidential election. Not the least role in this process is the dispersal of US GDP in the second quarter. The figure is likely to exceed 4% q / q, which is a "bearish" factor for XAU / USD. However, in the second half of the year, the situation can dramatically change. The effectiveness of the fiscal stimulus will fall, since in full employment and the economy at full capacity, its effectiveness is lower than during the recession. In addition, trade wars will lead to the dispersal of inflation and to a reduction in jobs due to the transfer of production to other countries.

From the point of view of seasonality, there is not much left to endure gold. Traditionally, it declined in May and June, did not feel very good in July, but in August and September, it regained lost ground. For sure, this will be facilitated by a potential correction in the US stock market. More than 40% of the profits of American companies come from abroad, and the revaluation of the dollar will worsen corporate reporting.

Technically, the update of the July low will increase the risks of continuing the peak of precious metal in the direction of $ 1215 per ounce. On the contrary, the breakthrough of the resistance at $ 1266 will activate the "Bat" pattern and will open the way for the bulls to its targets by 88.6%. It corresponds to $ 1,300 an ounce.

Gold, the daily chart

Exchange Rates 12.07.2018 analysis

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Viele Grüße,
Analytiker: Marek Petkovich
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