Political chaos in the US inflated the demand for safe-haven assets and pushed the quotes of gold futures to six-month highs. While Donald Trump is waging a war on three fronts, and representatives of the US administration scare the markets with unexpected comments, the readiness of the S&P 500 and other stock indices to move to the territory of the "bears" creates favorable conditions for the precious metal. Over the past month, its cost has increased by 3.6%, which is the best dynamics since August 2017.
The president of the United States does not get tired of criticizing the Federal Reserve, which is supposedly the most important enemy for the US economy. They say, Jerome Powell doesn't understand that to raise rates in the conditions of trade wars and shutdown of the government is evil. Thus, the central bank supports the dollar, which puts a spoke in the wheels of exports, GDP, corporate profits and the stock market as a whole. The White House's angry speeches against the Fed have not stopped, which heightens concerns about the possible resignation of its chairman. Yes, Donald Trump by law can not fire him, but to create such conditions that Powell left on his own, it is in his power. As a result, the issue of independence of the Fed was on the agenda, which strengthens the demand for safe-haven assets.
If earlier gold reacted sensitively to the monetary policy pursued by the central bank, regularly declining to meetings at which it was subsequently decided to raise the rate, and quickly compensating for losses after them, then the recent FOMC meetings make us look at the situation differently. It is quite possible that the normalization cycle has come to an end, as evidenced by the low odds of one act of monetary tightening by the Fed in 2019. According to CME derivatives, they make up only 26%.
Gold's reaction to FOMC meetings
The turmoil in the stock and oil markets due to concerns about the slowdown of the world economy, political dysfunction in the US (the president is unable to agree with Congress on the construction of the wall on the Mexican border) and the government's downtime is perceived with optimism by the "bulls" on XAU/USD. In the week of December 18, financial managers increased net positions on gold to 24,569 contracts, the highest level since mid-June. In December, net capital inflows to precious metal-oriented specialized exchange-traded funds exceeded $1.56 billion, the largest figure for all commodity ETFs.
Gold reaps the fruits of the truce in the US-China trade war. For most of the year, the precious metal has been under pressure due to the constant exchange of blows in the form of increased import duties. If the risks to the US economy are external, the flight of money into Treasury bonds allows the dollar to take away the function of the main asset- a refuge from the Japanese yen, the Swiss franc and gold. As soon as the storm begins the states, the situation changes by 180 degrees.
Technically, the rally of the precious metal in the direction of the target by 200% on the AB=CD pattern continues. It corresponds to $1,290 an ounce. The situation is controlled by the bulls, so it makes sense to use rollbacks to form long positions.
Gold, daily chart
