Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access all our platforms from a single account.
Gold: What if the Fed doesn’t deliver?
Ole Hansen
Head of Commodity Strategy
Summary: Gold is trading back above $1,300/oz ahead of tomorrow’s FOMC meeting, while a weaker dollar and lower bond yields have offset the continued headwinds from rising stocks.
From a fundamental perspective we maintain a positive outlook for gold given expectations for a weaker dollar, stable to lower bond yields and concerns about global stocks’ ability to forge higher amid current growth concerns.
However, keep in mind that many investors buy gold in order to own an insurance policy against adverse movements across other investments such as stocks. And as long stocks continue to climb gold is likely to struggle finding the strong bid which drove it higher up until February 20 when it peaked just below $1,350/oz.
The markets have now turned their attention to tomorrow’s Federal Open Markets Committee meeting. The expectations for what Powell and company decide to do have become an almost foregone conclusion -- a development which could leave the market exposed should they fail to deliver on the three points highlighted here:
• Hold interest rates steady
• Announce plans for the end of the asset roll-off from its balance sheet
• Lower projections for the number of interest-rate hikes this year.
Anything but a lowering of the projections for the number of future rate hikes from the current two will be taken as negative. Not least considering the current market expectations – using Fed funds futures – which has seen the probability of a rate cut before year-end rise to 26%. However, the reduced stress across global financial markets following weeks of surging stocks have potentially reduced the FOMC’s willingness to play ball with market expectations.
However, keep in mind that many investors buy gold in order to own an insurance policy against adverse movements across other investments such as stocks. And as long stocks continue to climb gold is likely to struggle finding the strong bid which drove it higher up until February 20 when it peaked just below $1,350/oz.
The markets have now turned their attention to tomorrow’s Federal Open Markets Committee meeting. The expectations for what Powell and company decide to do have become an almost foregone conclusion -- a development which could leave the market exposed should they fail to deliver on the three points highlighted here:
• Hold interest rates steady
• Announce plans for the end of the asset roll-off from its balance sheet
• Lower projections for the number of interest-rate hikes this year.
Anything but a lowering of the projections for the number of future rate hikes from the current two will be taken as negative. Not least considering the current market expectations – using Fed funds futures – which has seen the probability of a rate cut before year-end rise to 26%. However, the reduced stress across global financial markets following weeks of surging stocks have potentially reduced the FOMC’s willingness to play ball with market expectations.
The short-term technical outlook for gold looks challenging with the emerging bear flag which, if broken to the downside, could signal a move lower to key support just below $1,280/oz and potentially as low as the 200-day moving average below $1,250/oz.
With tomorrow’s meeting being the main event risk on the short-term radar the use of soon-to-expire options can be useful for those holding long positions to mitigate the potential downside risk, or for those looking to get short should the abovementioned break occur.
Options on the April futures contract on COMEX Gold expire in seven days on March 26. Below we have highlighted the put options with the 1,300 Put as an example being offered at $4.2/oz per lot (100 ounces), i.e. a cost per lot of $420.
Options on the April futures contract on COMEX Gold expire in seven days on March 26. Below we have highlighted the put options with the 1,300 Put as an example being offered at $4.2/oz per lot (100 ounces), i.e. a cost per lot of $420.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...