While hedge funds and asset managers form the largest net short position in gold over the past 17 years, and investors are throwing off ETF products for 13 consecutive weeks, which is the longest period of losses since 2013, the Bank of Russia is not tired of buying precious metals . In July, he purchased 26.1 tons, having shown the most serious activity since November. As a result, gold reserves reached 2170 tons, which is equivalent to $ 77.4 billion. In an effort to get rid of dollar dependence in the face of economic sanctions, Moscow actively diversifies its reserves by dropping US Treasury bonds and buying precious metals.
Dynamics of gold reserves of the Bank of Russia
While many investors are frightened by the rapid build-up of speculative short positions, others, on the contrary, say that reaching extreme levels is fraught with a sharp rise in prices. If there is an important information occasion. And he did not take long to wait. Donald Trump's statement about discontent with the monetary policy pursued by the Fed allowed the "bulls" in XAU / USD to go over to a counterattack and withdrew quotations from the field of a half-year bottom.
Everyone knows perfectly well that the main culprit of all the ills of gold is a strong dollar. Their 120-day inverse correlation exceeds 0.6, which is the maximum indicator for all assets of the commodity market. For comparison, the connection with US Treasury bonds is estimated at -0.2. As for the outflow of capital from specialized exchange funds, the demand for their products, as a rule, follows the price, and not vice versa.
Dynamics of capital flows in gold ETFs
What's next? When unemployment is in the region of half a century of low, consumer prices are looking towards 3%, and GDP is ready to grow by 4% and higher for the second consecutive quarter, the Fed can afford to continue the cycle of normalizing monetary policy. At the same time, history knows examples when the aggressive monetary restriction of the Central Bank led the US economy to recession. The probability of a recession in 2020 is constantly increasing. And this clearly does not satisfy Donald Trump, who will have to participate in the presidential election with a view to re-election during this period. Hence the dissatisfaction with the activities of Jerome Powell.
Thus, the further dynamics of the precious metal is directly related to the fate of the dollar and the response of the chairman of the Fed to the US president. The next opportunity will be presented to him at the meeting of the world's leading bankers in Jackson Hole. It is doubtful that Powell went to open confrontation. Most likely, he will focus on macroeconomic statistics. However, if the markets consider the rhetoric of the head of the Central Bank "pigeon", the sale of the US currency will continue, which will allow gold to continue the southern campaign.
Technically, after reaching the target of 261.8% and 113% for the patterns AB = CD and "Double top", a natural rollback followed. If the "bulls" manage to storm the resistance by $ 1209 per ounce, the risks of development of correction to the downward trend will increase.
Gold, the daily chart
