Precious metals have dropped heavily over the last three trading weeks, so we believe it's time for technical correction to the upside. Bulls have had a couple of occasions for joy: first of all, bearish trends on all the world's leading stock exchanges, which is great for gold as a safe asset, and, second of all, US debt market dynamics. US 10-year government bonds yield is now exceeding the inflation rate - that's exactly when gold feels promising. We only expect a short rise, as the uptrend is not strong enough yet because the latest CFTC release showed gold long positions were reduced by speculators.
Trading recommendation: Buy 1220/1200 and take profit 1238.
This week we expect flat. On the one hand, oil may start correction towards psychological level of $50/barrel due to increasing oil output in USA. There oil inventories have increased over the last 12 weeks in a row. We will expect this trend continuation, as the latest Baker Hughes report showed increase of the number of oil rigs again.
On the other hand, we are only 10 days away from OPEC summit, where cartel members may extend their oil output reduction agreement. In this case bulls will ramp up long positions. The Saudis have repeatedly stated that they are not satisfied with current oil prices. We believe, that traders will push the quotes up towards May 25. This week, however, moderate decline may occur.
Trading recommendation: flat 50,00-52,00.
We are observing some interesting signals on American stock market. Last week, the two indices S&P 500 and NASDAQ renewed their historical highs. Meanwhile, the other two indices Russell 2000 and Dow Jones Industrial didn't manage to set new highs. Such divergence usually means corrections on stock markets. VIX having reached 10-year low started to reverse, which also means changing trend. Risk appetite is reducing, which is a good sign for bears. Chicago Stock Exchange speculative net positions dynamics also indicates changing trend. As mentioned earlier, the S&P 500 has renewed historical highs on May 8, meanwhile speculators have reduced long positions on three trading weeks in a row. Long positions volume on Chicago exchange has reached its lowest over the last 6 weeks.
Trading recommendation: Sell 2391/2410 and take profit 2370.