While the recent Israel-Hamas turmoil helped boost the yellow metal, the domestic fundamental outlook is much less supportive. Substantial Drawdowns A
head With inflation outperformance amplifying U.S. Treasury yields and the USD Index on Oct. 12, the PMs remained under pressure from their familiar fundamental foes. Moreover, while gold bounced due to geopolitical concerns in the Middle East, the fundamentals continue to follow our medium-term roadmap. For example, investment heavyweight
released its Cyclical Outlook report on Oct. 11. And with the firm sharing our view thatinflation is old news and weak growth is the next bearish catalyst, an excerpt read: “We forecast core inflation in the 2.5%–3% area in the U.S. and Europe at the end of 2024. We anticipate that falling growth and rising unemployment will lead to more disinflation, helped also by other factors.” Please see below: To explain, the colored lines above show how U.S.
’s report added: “We analyzed 140 tightening cycles across developed markets from the 1960s through today. When central banks hiked policy rates by 400 basis points or more – as several have done this cycle, including the U.S. Federal Reserve , the European Central Bank , and the BOE – almost all such instances ended in recession.” Thus, while we warned that history is not on the soft-landing bulls’ side, most assets are priced as if inflation will dissipate with little economic carnage.
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