Fundamental analytics

Gold refreshes historical highs and US GDP historic lows

  1. FOMC meeting

  2. Updating historical gold highs

  3. Dollar falling

Investors' attention was focused on the US news during the week. On Wednesday the results of the two-day FOMC meeting were announced. There were no surprises and the regulator kept the key parameters of monetary policy unchanged. At the same time, Jerome Powell did not rule out additional stimulus measures and announced a long period of low interest rates in the USA.

The epidemiological situation in the United States remains difficult. The authorities of the country have not yet managed to take control of the virus. The new wave of the epidemic has a negative impact on the country's economy. In the 2nd quarter, a record 32.9% drop in GDP was recorded.

As we approach the presidential elections, domestic political struggle intensifies in the USA. During the whole week Republicans and Democrats tried to agree on a new package of measures to stimulate the economy, but failed to find a consensus. Donald Trump criticized the idea of voting by mail and raised the issue of possible postponement of the presidential election due to the pandemic situation.

Currency market

On the currency market, all attention is still focused on the American currency. In July, the dollar showed a record monthly decline for the last 10 years. The dollar index has fallen to its lowest values since May 2018.

Active sales of the U.S. currency are provoked by all of the above factors: low interest rates and soft policy of the Fed, the spread of COVID-19 and weak economic recovery, conflict with China and growing political uncertainty. The dollar has lost its protective asset status and is now virtually devoid of any significant support factors.

Other G7 currencies were able to significantly improve their position amid the weakening of the dollar. First of all, it is worth noting the British pound, which updated its highs for more than 4 months of trading. Investors continue to buy the British currency, despite the fact that the UK and the EU were unable to make progress in the negotiations on Brexit. Probability of the UK's exit from the EU without an agreement is growing as the negotiations are at an impasse again. But investors are still ignoring this fact, focusing all their attention on the dynamics of the US dollar.

This week, the EUR/USD pair tested the level of 1.1900. The last time the price was at these levels was in May 2018.

Precious metals market

Gold was highlighted this week with an update of the historic high of trading. The market has formed the most favorable conditions for the development of the bullish trend in gold. The dollar is actively losing its position across the entire spectrum of the market, while investors are increasingly concerned about the prospects for the global economy in the conditions of the spreading pandemic. In fact, gold is becoming the only reliable asset of protection.   

Oil market

Oil prices were under pressure for most of the week. The main risks remain related to the recovery of energy demand. Amid the news of worsening epidemiological situation, many investors fear a slowdown in demand recovery, while OPEC countries intend to increase production by 2 mn bpd from August.  

Stock market

Stock indices demonstrated mixed trading dynamics. Investors are afraid of a worsening situation in the global economy, so the appetite for risk remains limited.  

 

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