Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Commodity Strategy
Following the seventh US rate hike this cycle and with the promise of two more before year-end, I see the potential for the gold focus turning more supportive.
• The dollar rally is showing signs of running out of steam.
• The US yield curve is likely to continue to flatten as short-term yields rise while long-end prices stay supported (due to emerging market worries and trade wars).
• Even if bond yields move higher, rising inflation expectations may keep real yields rangebound as breakevens move higher.
• Hedge fund positions are near a two-year low while total holdings in ETFs have recently seen a drop from a five-year high.
Look out for silver, which may prove to be the proverbial canary in the coal mine as it challenges resistance above $17/oz and a trendline dating from last September.
Gold needs to clear $1,308/oz, its 200-day moving average, in order to attract renewed “paper” demand through futures and ETFs. A break above $1,308/oz could see prices initially return to an area between $1,323/oz. and $1,333/oz.