Precious Metals

Central banks are in a dilemma whether to prioritize supporting growth or bringing inflation back to target. This is unlikely to end well. Investors should be defensively positioned.

This year’s rise in commodity prices represents a blow-off rally rather than the start of a durable bull market. The global economy is heading for a recession. Stocks, commodities, and other risk assets are vulnerable.

EUR/USD collapsed in the wake of last week’s hotter-than-expected US CPI report. Is this pessimism warranted and will the euro’s trading range that has prevailed since 2023 breakdown?

Gold and bitcoin are conceptually joined at the hip because the value of both comes from their ‘non-confiscatability’ by inflation, by bank failure, and in the case of bitcoin, by state expropriation. The sharp recent rallies in both gold and bitcoin reflect that the market has suddenly upped the value of non-confiscatability, and a plausible explanation is that recent US inflation data show that the journey to sustained 2 percent inflation has stalled, raising the risk that the Fed might balk at finishing the journey. Plus: JPM, CL, and USD/CHF are tactical reversal candidates.

Europe credit flows are stabilizing, hence a major drag on the region’s growth will dissipate. What does this development imply for European equities?

Inflationary pressures this year will remain subdued as labor-productivity growth – driven by strong capex and R+D spending – continues. This will make the Fed more confident in beginning its policy-rate-cutting cycle in June, and will keep gold well bid. We are raising our gold target to $2,300/oz. We continue to expect no recession this year.

In this Strategy Outlook we examine why, contrary to popular perception, the odds of a global recession over the next 12 months are rising not falling.