Gold will never match oil. Forecast as of 01.07.2022


The size of the physical gold market is significantly smaller than the paper one. The scale of futures operations is greater than the demand and supply of physical asset. As a result, other factors influence the XAUUSD price. Let’s discuss the Forex perspective and create a trading plan.

Monthly gold fundamental forecast

If the gold price depended on the supply and demand of physical asset, its popularity would increase significantly. Indeed, the G7 ban on Russian gold imports, steady investment interest and a recovery in demand for jewelery while lifting a blockade in China predicts a rise. XAUUSD trend. It is noteworthy that Russia is the second largest XAU miner, while China is the first consumer. Alas, the gold and oil markets are fundamentally different from each other. The precious metal market is managed by speculators, which predicts the fall in prices.

Ormination structure

Source: Bloomberg.

During the first half of June, the gold exchange rate changed paradoxically. It was stable despite the build-up in Treasury bond and U.S. dollar yields. Such an environment is considered unfavorable for XAUUSD bulls. Gold does not earn interest and is quoted in U.S. currency, so it cannot compete with Treasuries or the greenback when debt rates rise.

In my opinion, XAU stability is linked to concerns about the entry of the global economy into the era of stagflation, a combination of high inflation and sluggish GDP growth. As a result, shares of gold ETFs have not fallen as much as other metals in the sector. Silver, platinum and palladium are significantly more dependent on industrial demand, which is extremely vulnerable to an approaching recession. Not surprisingly, the XAUXAG rate has reached its highest level in two years.

Dynamics of ETF holdings

Source: Bloomberg.

In my view, the stagflation environment has caused an overflow of stock capital and bonds to the U.S. dollar and gold. Now investors are more concerned about the recession, not just the U.S. but also the global economy. As a result, money flowed into treasuries and other safe-haven assets, including the green dollar, the Japanese yen and the Swiss franc. Their outflow from the precious metals market may increase if the S&P 500 stabilizes.

The first half of 2022 was the worst for the U.S. stock market since 1970. The broad stock index lost more than 20%, with 72% of investors surveyed by Deutsche Bank expecting it to fall further, while 90% predict a recession in the US. economy by the end of 2023. However, in January-June, the S&P 500 fell by 15% or more; in July-December, the index recovered and grew by an average of 24%. This was the case in 1932, 1939, 1940, 1962, and 1970. Asset managers currently have above-average cash positions, below-average stock positions, and a high level of pessimism about the outlook for the economy. These factors could trigger an accumulation in stock indices and an outflow of capital from the gold market to the stock market.

Gold business plan for a month

The slowdown in US inflation, inflation expectations and the relative rise in the real yield on US fiscal bonds create another headwind for the US economy. XAUUSD. It is unlikely that the Fed will change its stance before it receives any evidence of a slowdown in PCE. This gives reason to continue selling gold at $ 1750 and $ 1720 per ounce.

XAUUSD price chart in real-time mode

The content of this article reflects the opinion of the author and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for information purposes only and should not be construed as providing investment advice for the purposes of Directive 2004/39 / EC.

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