Friday, Sept 13, 2024

what is going on with gold and rates expectations?

Hi all, and happy Friday!!! I’m sure that it being the 13th is totally irrelevant, but just in case, try not to walk under ladders, ok?

Today I wanted to dive into the new stablecoin report by Nic Carter et. al., but instead I got dragged into trying to figure out what was going on with gold and the wild swing in US rates expectations, and I do try to keep these newsletters from getting too long (plus, Substack flashes green banners at me if it exceeds a certain weight). Already there’s plenty on the docket for Monday!

IN THIS NEWSLETTER:

• The story behind gold’s surge: rates, fiscal and military.

• BTC still under pressure

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WHAT I’M WATCHING:

The story behind gold’s surge

Something is going on with gold. And rates expectations. And the dollar. And much else besides, so let’s try to unpack this.

The gold price has been on a tear recently, but surged even more yesterday.

(chart via TradingView)

That size of a move suggests big buyers, either institutional traders or central banks or both. What’s more, it coincided with a drop in the DXY dollar index, which reinforces the idea of foreign reserve adjustments.

(chart via TradingView)

I can think of three possible reasons:

1) Rate cut expectations have jumped again. Just yesterday, I wrote that it felt like a relief to have markets finally reflect a more realistic expectation of a 25bp cut next week, rather than the overly optimistic (and alarming) 50bp. When I wrote that, the CME FedWatch model reflected an almost 90% certainty that the Fed would take the cautious route.

I logged on this morning to see that we’re back to almost 60/40. What happened?