Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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Gold holds steady despite deleveraging risks in volatile markets
Ole Hansen
Head of Commodity Strategy
Key points in this update:
- Global financial markets remain on the edge as Trump's implementation and subsequent cancellation of US tariffs against major trading partners continue to stress Wall Street and the wider market
- The yellow metal continues to hold firm, trading above a USD 2900 following another relatively shallow correction
- Traders and investors are also reacting to a sharp and sudden deterioration in US economic data, raising the risk of a gold-supportive stagflation period
- Activity across exchange-traded funds and the COMEX futures market paints a mixed picture.
The "Magnificent Seven" tech stocks—Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla—were, until very recently, the crown jewels of Wall Street, driving much of the market's gains in 2024 while pulling in billions of dollars from overseas investors looking to join a period of US exceptionalism. However, the tide has turned dramatically in recent weeks, with the Magnificent Seven index plunging into a bear market, falling more than 20% from its highs. The Nasdaq Composite has also seen sharp declines, with tech stocks bearing the brunt of the losses, driven by economic uncertainty and recession fears, forcing high expectations and valuations to meet reality and driving a transition from growth to defensive stocks.
Normally, this is not the way I would start a commodities update. However, given the recent movements across the US stock market and the USD—which has weakened—these developments underpin several of the recent moves across commodities. Capital is flowing out of overpriced US stocks into other regions, while a series of tepid economic reports and the ongoing implementation and subsequent cancellation of US tariffs against major trading partners continue to stress Wall Street. These factors raise demand concerns for some commodities, provide tariff-related support for others, and, overall, maintain a continued focus on safe havens such as gold to mitigate some of these potential dangers—not least the current deleveraging risks, as a recent volatility spike has forced investors to reduce their exposure.
For now, the yellow metal continues to attract demand, with the latest correction attempts being too shallow to force any major reduction risks from managed money accounts that depend on momentum to maintain and build exposure. Gold investment demand has shown some signs of divergence in the past month, with managed money accounts, such as hedge funds and CTAs, reducing bullish bets while demand for bullion-backed ETFs continues at a brisk pace. While hedge funds focus on momentum and short-term technical developments, ETF investors tend to be a bit more sticky, with the latest increase potentially seen as a hedge against stagflation in the US.
Beyond geopolitical tensions and the potential breakdown of a world order that has prevailed for generations, traders and investors are also reacting to a sharp and sudden deterioration in US economic data. This has led to increased pricing of stagflation risk—a period characterised by lower growth, rising unemployment, and increasing inflation. Forward-looking indicators suggest these developments could materialise in the coming months, thereby lifting the expected number of 25 basis-point rate cuts this year to more than three from a January low of just one cut.
With that in mind, the outlook for gold remains supportive, particularly given the recent dollar weakness, and the limited depth of the latest correction, where prices have bounced back before getting anywhere near a key area of support between USD 2,790 and USD 2,811. In addition to diversification and safe-haven demand, gold will likely continue to benefit from central bank buying and fiscal debt concerns. Spot gold trades up 11% year-to-date, with the one-year gain approaching 34%, and while we are aware of the risk a deeper correction may unfold, we maintain our recently raised target of USD 3,300.
Recent commodity articles:
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
28 Feb 2025: Commodities weekly: Broad weakness as tariff fatigue sets in
24 Feb 2025: COT Report: traders turn selective despite ongoing broad rally
21 Feb 2025: Commodities weekly: energy market strength and Trump rethoric fuel surge
18 Feb 2025: COT report: crude, gold and grains see mild profit taking
5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High
4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs
3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive
1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast
31 Jan 2025: Commodities weekly: Strong January led by precious metals
29 Jan 2025: Agriculture sector rally led by coffee, corn and cattle
27 Jan 2025: COT Report: Commodity buying extends to fourth week
24 Jan 2025: Commodities weekly: Trump tariff threats and energy agenda in focus
23 Jan 2025: Crude oil weakens amid tariff uncertainty
22 Jan 2025: Gold and silver see fresh gains as Trump 2.0 era begins
20 Jan 2025: COT Report: Elevated commodities longs face short-term risks
17 Jan 2025: Commodities weekly: Strong January rally pauses ahead of Trump
15 Jan 2025: Q1 2025 Commodity outlook: A bumpy road ahead calls for diversification
14 Jan 2025: COT Report: Hedge fund long jumps to 17-month high led by crude, gas and metals
13 Jan 2025: Crude oil rally amid winter demand and Russian sanctions
10 Jan 2025: Commodities weekly: Strong start to the year led by energy and metals
7 Jan 2025: COT Report: Managed money's year-end positioning in forex and commodities
Podcasts that include commodities focus:
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
25 Feb 2025: Meltdown risks are rising. What to watch next
18 Feb 2025: Europe is on fire
5 Feb 2025: Mag 7 risks underappreciated?
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins
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