Here is why you should you invest in Gold in 2017

After a very volatile year, Gold gained more than 8% in 2016. The 1^st half of the year was driven by fears of a worldwide recession and uncertainties around the BREXIT vote, with Gold prices consequently increasing by more than 23% to reach $1,380 an ounce.

In the 2^nd half of the year, worldwide risks seemed to have diminished, so Gold prices declined. As the American Dollar rallied at the end of 2016 in the face of increasing interest rates and Trump’s proposed economic policies, Gold went automatically down due of the negative correlation existing between the 2 assets.

Gold is a safe-haven asset, which investors seek in times of global worry, as it’s considered as a hedge against uncertainty. We already know how risky 2017 could be, which could lead to an increasing demand for the precious metal.

Стената падна

Случайност или не, в деня, когато Доналд Тръмп подписа заповед за изграждане на голяма стена по границата с Мексико и една друга голяма стена се срути в този ден, а именно бариерата при 20 000 пункта в индустриалния Dow Jones най-накрая бе разбита след няколко неуспешни опита през последните месеци. Помогнаха по-добрите от очакваното приходи на компанията Boeing, чиито акции регистрираха най-високите си нива в историята и се оказаха гориво за след изборното рали, което продължи с умерена скорост. Широкият S&P 500 също затвори на рекордно високи нива и на няколко инча от прага 2 300 пункта, като финансите и технологиите водеха възходящия тренд за втори пореден ден.

 Какво е бъдещето на Wall Street в момента? Е, ако в краткосрочен план нищо твърде смущаващо не възникне от всяка заповед или указ на Тръмп и приходните отчети от компаниите продължат да излизат над очакванията, има място за поскъпване поне до следващия приходен сезон, предвид факта, че технически няма модел за направата на връх, но все пак има причина за появата на консолидация. Dow Jones достигна горната линия на възходящия трендови канал.

В Европа Stoxx 600 се покачи с 1,3%, финансите бяха водещите лидери в поскъпването, след като Deutsche Bank обяви частично първично публично предлагане на своя отдел за управление на активи. На Forex пазара въпреки заповедта на Тръмп, мексиканското песо се покачи с 1%, след като инвеститорите намалиха своите опасения за негативните ефекти от съществуването на гранична стена с най-важния за Мексико търговски партньор, тъй като близо 80% от мексиканския износ е насочен към САЩ. С царящия оптимизъм на пазара и повишения апетит към риск, златото записа втора поредна загуба, спадайки до 1 201,90$ за унция.

The markets in 2017

In recent months, prices of the major stock indices have risen sharply – most notably the US indices – with some having caught up with the losses of the first half of 2016. Given the length of these rallies, we should soon expect some corrective phases. These downturns could be good opportunities to open positions in some sectors (especially financials, oil sector and luxury goods sector). Of course, your main scenario must be a continuation of the upward trend!

Markets were supported by better US economic growth figures, expected to be as good or even better in 2017. The rise in interest rates in the United States also led to massive reallocation of financial assets, not to mention Oil, which had fallen sharply in the first quarter of 2016 but recovered with the historic agreement between the OPEC member countries.

The FOMC minutes have been published this week, and members noted that under Trump’s administration a “more expansionary fiscal policy” could raise the likelihood of a “somewhat tighter monetary policy than currently anticipated”, which will further strengthen the USD.

Trump first 100 days in office will be highly monitored to see if he keeps his promises

The expansionary economic program of the 45th President of the United States, its major infrastructure works, its tax cuts for households as well as for businesses should increase US growth, the US Dollar as well as improve forecasts for future corporate profits.

The good performance of Wall Street should support the European markets, with European exporting companies standing to benefit from the weakness of the Euro.

Rising Uncertainties

But let us not forget the unforeseen events of the past year, the consequences of which are in many ways yet to be understood and will undoubtedly play a role in the markets.

The political landscape has seemingly shifted, particularly in Europe. The French presidential elections, the legislative elections in Germany and the new Italian government can all potentially affect markets, particularly if the shift towards nationalism continues.

The BREXIT timetable will be closely followed, as well as the first steps of Donald Trump as the new US President – who will assume the role on January 20th. There are many surprises that could potentially unfold here.

Global growth has also been negatively impacted by the Chinese economic slowdown, which is still worrying investors, as well as strong capital outflows, the fall of the Yuan, the fall in foreign exchange reserves and the large Chinese debt.

Given all the potential surprises in store for us in 2017, it is difficult for economists to prepare economic forecasts for the year. Should a precise scenario to construct forecasts be used, or rather the sum of alternative possible scenarios? It is difficult to answer this question. Either way, we’re all wondering if the dynamics observed at the end of 2016 will extend to this year...

The start of a new year is always the perfect time to think about your trading behaviour over the past year. It’s important to look back at what you’ve accomplished regarding your wealth and investments. It is only when you go through this process that you will be able to determine your money goals and move forward in achieving them.

Why the EUR/USD could reach parity this year

1. Speculators increased their bullish bets on the American Dollar during the 1st week of the year

The latest Commitment of Traders (COT) report from the Commodity Futures Trading Commission (CFTC) shows that non-commercial traders increased their bullish bets for the US dollar during the first week of 2017, continuing on from 2016’s bullish finish. The US Dollar’s bullish positions have therefore been increasing for 2 weeks in a row. 

This report is important for your trading, as it measures the sentiment of influential traders over a period of time. You will then be able to determine market sentiment extremes, which might describe market tops/bottoms. While reading this report, remember that positions from non-commercial traders will indicate the trend’s direction, as they are large speculators trying to make money from their trading activities by following the trend.

2. Trump’s planned economic policies bode well for US growth

The exponential market rally since Donald Trump’s election has been impressive. We can only hope this will continue into the New Year as well. On the 20th of January, Donald Trump will be officially sworn in as President of the United States – naturally, market participants will be closely watching his first actions as President.

His economic program - with tax cuts for households and businesses, massive infrastructure program and incentives to bring back manufacturers/profits in the US, will potentially increase US growth and the value of the US Dollar. But with such a program, deficit will go up. As an example, to fully pay for the cuts without adding to the federal budget deficit, government spending must be reduced by 20%.

His intended policies have been interpreted as beneficial to the US by traders, which in turn have led to a higher USD, as more rate hikes are now expected. His large tax cuts and wider deficits might actually support consumer spending and economic growth at first. But we might rapidly see negative impacts rising, especially from higher interest rates caused by the important deficits and higher inflation.

Inflation can be described as a sustained increase in the general level of prices for goods and services. The FED’s inflation goal is a PCE indicator at 2%. Given Trump’s policies, inflation could very well increase faster than initially planned, and the FED might decide to increase rates faster than expected.

Higher interest rates generally push the US dollar higher and slow the economy. A strong dollar may eventually also be problematic for US growth, as exports will be more expensive to foreign buyers.

Even if the American economy is seen as strong with full employment, a rising dollar will still be considered as a headwind, as it will probably reduce the total effective demand. On the other hand, the advantages for the American consumers might offset the negative aspect of a strong dollar. A stronger dollar makes imports cheaper to domestic consumers, which may lead to higher spending. Remember that personal consumption represents more than 60% of the GDP!

3. Uncertainty rising across European political landscape

2017 will see the French presidential elections, the legislative elections in Germany and the new Italian government, among others, which could all potentially affect markets. The BREXIT timetable will also play an important role in Europe stability, depending on how the negotiations will be held. This will be closely monitored.

Political uncertainty and instability will likely continue to grow this year, with more dissatisfaction and distrust of governments.

EUR/USD outlook

A survey conducted by Reuters shows that the USD is likely to remain strong this year in the face of the numerous upcoming rate hikes and the future President’s economic policy. As nationalism continues to take hold across different countries, political uncertainty in Europe will weigh on the stability of the Euro Zone, and thus on its currency.

Prices are currently in an ascending channel, but the bearish Ichimoku cloud is thick, and it might be difficult for prices to cross it. The Lagging span (green curve) is above prices, but still need to cross the Tenkan line (red curve) and the Kijun line (blue curve). Prices are also trading just below a resistance line at 1.0565.

Forex news,fundamental and technical analyses: Why Is The Pound Still under Pressure?Earlier this...

Forex news,fundamental and technical analyses: Why Is The Pound Still under Pressure?Earlier this...: Why Is The Pound Still under Pressure? Earlier this week, the British Pound strengthened against its currency counterparts with Theresa M...

Why Is The Pound Still under Pressure?

Earlier this week, the British Pound strengthened against its currency counterparts with Theresa May’s speech. This was mainly due to the fact that the British Prime Minister decided that negotiations on BREXIT would be submitted to a Parliament vote. But the risks of a "hard BREXIT" are increasing. Why is the Pound still under pressure? What are the risks? What are the opportunities?

The British currency has lost nearly 20% since the referendum of the June 23, 2016 on the UK's membership with the European Union. On Monday, the British Pound even hit a low at 1.1983 against the US Dollar among increasing concerns of a "hard Brexit".

On Tuesday, Theresa May delivered a long-awaited speech on how she plans to conduct the BREXIT negotiations she wants to start before March 2017 – the date that she plans to activate Article 50. Without triggering Article 50, the UK is officially not allowed to start negotiations, which should last at least 2 years. To be able to trigger Article 50, one needs to settle a withdrawal agreement – or more commonly called: “the terms of the divorce”, such as the rights of European citizens living in the UK and the rights of the UK citizens living in the EU, how to allocate unspent funds that should be received or cross-border security arrangements.

Despite the clear break with the European Union wanted by May, the Sterling rose by more than 2.5% during the speech after the promise to submit the final agreement to the vote of Parliament. The increase is one of the first of this size since the financial crisis of 2008. The cable is trading under a strong resistance to 1.2430. Prices pulled back from this level on Tuesday and are now close to the moving average of the Bollinger Bands indicator. If the pair continues to go down, it could touch the support level at 1.21471. Conversely, it could also rise to 1.2430, and then 1.2726.

It’s important to mentione that Parliament will play an important role in the negotiations in order to get the best possible outcomes for the United Kingdom. This is a difficult and unprecedented situation with decisions that can have far-reaching consequences for the UK and its trading partners. To play a constructive role, Parliament should also be able to follow the negotiating objectives and comment on how negotiations are conducted.

Some investors believe that the fact there are some pro-European MPs (Members of Parliament) could "soften" the negotiations. Although May acknowledged that there would be concessions to be made, it was clear that "the United Kingdom can not continue to be part of the single market" and that "we will get control of the number of people coming to Britain from the EU". Remember that these are the two main themes of the campaign: trade and immigration. They will therefore be at the center of the negotiations.

The pair is currently trading on an upward trendline. If it bounces back from this line, the pair could go back to the resistance level at 0.88523. If it breaks through this trend line, it could go towards the supports at 0.86115 and 0.84892.

The European Union is the main trading partner of the United Kingdom, with 44% of exports of goods and services, and 53% of imports in 2015. Last year the government estimated that 3.3 million jobs were linked to exports from the United Kingdom to European countries. The value of the EUR/GBP pair has been strongly influenced since BREXIT in the view of the uncertain prospects of future relations between the UK and Europe. Of course, the degree of access to the Single Market in terms of goods, services, and people, as well as business regulations are raising concerns, especially for companies.

One thing is certain: "Brexit means Brexit".

There are still some grey areas that can strongly influence the British currency. Deutsche Bank believes that the British Pound could reach parity with the Euro. It will therefore be necessary to follow the evolution of the BREXIT negotiations to determine how these currencies will evolve and what opportunities they can bring for FOREX traders.