A major risk event is coming up for the US on Tuesday ahead of the Federal Reserve’s interest rate meeting on Wednesday. Although US CPI data is unlikely to change the Fed’s mind for Wednesday it will certainly set the mood and tone.
If you notice you can see that the seasonal pattern becomes very strong after the middle of December. That is not for no reason. The middle of December marks the last Fed meeting, so investors are often confident to take their gold position once the path for US yields and the USD is more predictable with the Fed having finished their last interest rate meeting for the year.
Short-term interest rate markets see the bank of Canada making four 25bps interest rate cuts next year. With expectations that the bank of Canada will leave current interest rates unchanged at 5% this week. Could there be some significant selling in the Canadian dollar?
The seasonals are saying that gold could be about to break its all-time high. The average return in gold between the 13th of December and February the 20th is over 4%. If the seasonal pattern repeats this year, according to its average, that will take gold to fresh all time new highs!
Markets have been happy to sell the dollar recently on the narrative that the US is seeing slowing economic data, inflation is falling, and the prospect of federal reserve interest rate cuts are growing ever closer. This dollar weakness is expected to continue as long as the Federal reserve doesn’t signal any more rate hikes.
Speculation is growing that the US economy is heading for a soft landing. If this is the case, then the recent strong run in technology stocks could carry on. Using the season axis filter option we can filter the strongest seasonal patterns of the individual shares making up the NASDAQ 100.
Oil markets have been pushed and pulled around in recent days and weeks on the worries about supply with the Israel Hamas conflict and most recently on concerns regarding the collaboration of production levels within the OPEC+ group. The latest concern is Nigeria and Angola, having to accept a new baseline that reflects their actual production capabilities.
The Bank of Japan is expected to exit it’s negative interest rate policy and start hiking rates around spring 2024. The Swiss National Bank is expected, by short term interest rate markets, to stop hiking rates with its inflation at 1.7%.
When the US dollar falls and real yields drop too, that tends to be a great environment for gold buying. The last few weeks have seen significant falls in the dollar on expectations that the Federal Reserve has reached the peak in interest rates.
Nvidia’s shares have risen over 230% since the start of the year and their earnings are due out after the close on Tuesday. From a seasonal perspective there is a very strong upside bias in Nvidia, but look at the volatility that there has been too!
