Head of Commodity Strategy
Since the mid-May mini collapse, when short-covering took the dollar sharply higher and metals lower, gold has increasingly been settling into a relatively tight range around $1,300/oz. The run-up to what is expected to be the seventh US rate hike in the current cycle has once again sapped investor confidence as well as demand for the yellow metal.
We believe, however, that the risk of another cat-out-of-the-bag rally has increased – not least considering the dollar rally showing signs of pausing following the recent run-up, US-China trade worries not going away, and rising inflation concerns keeping US real yields rangebound.
Gold traded lower ahead only to rally following most of the previous six rate hikes in this cycle, not least considering the dovish manner in which the Federal Open Market Committee presented these rate hikes.
Paper investments have faded with hedge funds' position near a two-year low while total holdings in exchange-traded funds backed by gold has dropped 34 tons to 2,206 tons from a five-year high last month. In the futures market, the aggregate open interest and the weekly trading range have both hit a six-month low.
These observations are all pointing towards an imminent move in gold and while the downside may still be in play, the low level of hedge fund participation makes us believe that the direction that could receive most momentum would be to the upside.
However, a hawkish hike later today carries the risk of sending the dollar and bond yields higher and gold lower. The key levels to look out for has remained the same for some time now: a sustained break below $1,286/oz would call into question the rally from the December low while a move above $1,308/oz, the 200-day moving average, is likely to attract renewed technical and momentum buying from funds currently underweight in gold.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
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