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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.
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.
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.
Macro: It’s all about elections and keeping status quo
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
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With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Macro: It’s all about elections and keeping status quo
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Equities: The AI and obesity rally is defying gravity
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
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