Noticias del mercado & perspectivas

Early voting has officially begun in several critical battleground states, including Arizona, Georgia, Nevada, and North Carolina signalling the start of an intense final stretch in the race for the presidency. Wisconsin and Pennsylvania have also now entered the early voting period and what is interesting in 2024 over 2020 is that Trump has backed early voting and this has seen record levels of Republican voters going early. For example - voter engagement in North Carolina and Georgia, has seen more than 1 million ballots have already been cast.

This surge in early voting represents 13 percent of North Carolina’s registered voters and 17 percent of Georgia’s, reflecting heightened enthusiasm and participation in this crucial election that is still sitting on razor thin margins. Despite the impressive numbers, caution is needed, and early voting turnout is not necessarily predictive of the final election outcome. Rules regarding the release of early voting data are strict.

States are prohibited from reporting any results until after the polls close on Election Day. Moreover, most key swing states don’t allow the counting of ballots until Election Day itself, making it difficult to gauge any meaningful trends from early voting alone. But what catches people’s attention is the amount of ‘registered party’ voters that are out particularly Republican voters – this however doesn’t necessarily translate to votes for this party or that.

Tightest Presidential Race in over 50 years National polls show an increasingly competitive race between Trump and Harris, with the gap between them narrowing as Election Day approaches. In recent weeks, Trump has managed to close in on Harris’s lead, especially in swing state polls, where he has shown slight but consistent improvement. Polling averages now indicate a virtual tie, with both candidates hovering within the margin of error in national surveys.

According to the polling aggregator FiveThirtyEight, Harris holds a narrow lead of 1.8 percentage points over Trump nationally, while Trump enjoys a slight 0.5-point advantage in key battleground states. Betting aggregator RealClearPolitics reports a similarly tight race, with Harris leading by 1 point nationwide, while Trump leads by 1 point in swing states. However, on the betting markets, RealClearPolitics have Trump 60.1 points to 38.2 points and a clear favourite – a trend that started on October 6 and has never slowed.

The back-and-forth dynamic suggests that Trump’s recent gains, coupled with a slight dip in Harris’s polling numbers, could indicate that he is winning over more independent voters or converting a portion of Harris’s marginal supporters. One recent poll conducted by the Washington Post/Schar School in early October provides further evidence of this highly competitive race. In their survey of likely voters in key swing states, Harris leads by a razor-thin 1-point margin, but all results remain within the margin of error.

The poll shows Trump holding the largest leads in Arizona (+3 points) and North Carolina (+3 points), while Harris has the upper hand in Georgia (+4 points) and Wisconsin (+3 points). This swing state polling underscores how critical these battlegrounds will be in determining the outcome of the election, with both candidates relying heavily on marginal voters who remain undecided or only tentatively committed. This election is shaping up to be one of the closest in modern U.S. history, with both candidates facing unprecedented levels of uncertainty.

Pollsters are warning that even a small margin of error could dramatically alter the outcome, particularly in swing states where the race is so tight. Polling in past elections has seen significant errors - most notably in 2016, when many polls underestimated Trump’s support, leading to an unexpected victory in several key states. While polling improved in 2020, it still underestimated Trump’s performance, albeit by a smaller margin.

In the 2022 midterms, polls underestimated the strength of Democratic candidates. These trends underscore the inherent challenges pollsters face in accounting for rapidly shifting demographics, small sample sizes, and voter behaviour that can be difficult to predict. In this context, a structural polling error could potentially allow either Trump or Harris to sweep the battleground states, dramatically altering the electoral landscape.

The polling community remains cautious, aware that even the most accurate forecasts in recent elections still had an average margin of error of 1 percentage point—enough to swing the outcome in such a close race. Which is why we as traders need to be mindful of confirmation and attention biases that can cloud trading judgement. Caution is Advised As mentioned, prediction markets have reflected a tightening race, but with Trump now emerging as a slight favourite in many forecasting models.

Despite this, we urge caution, pointing out that election prediction markets often have low liquidity, meaning they may not fully capture the nuances of voter sentiment or reflect real-world conditions as accurately as traditional polling. We also suggest - “Research, research, research” and from sources that both agree and disagree with your trading view and personal points of view. The election isn’t over, and trading in the USD and the bond markets tell us this is the case.

Plus, anything could happen in the next 14 days, both candidates are criss-crossing the country and the current funds being spent on the election has never been higher. Both Trump and Harris are ramping up their campaign efforts. Harris is slated to appear at a CNN town hall in Pennsylvania, an essential swing state, as part of her ongoing efforts to mobilize voters in the final days leading up to the election.

Trump on the other hand is spending most of his media time on his own social media channel Truth Social and other online media that is friendly to his views. Anything could happen here.

We are less than three weeks away from the ASX earning season and we are less than two weeks away from the earnings season in the US. So, we need to start prepping for trades and opportunities now. First and foremost, do not forget that confession season is well and truly upon us here in Australia.

Downgrades clearly have been coming from the discretionary sector; we've even seen companies hit the wall with the likes of Booktopia going into administration. There are some clear thematics that are growing in the Australian market. Energy, while the worst performing sector for the financial year 2024, may actually show you that earnings were slightly above expectation on higher than expected oil prices.

Materials led in the main by BHP, Rio and FMG Have once again benefited from higher than expected iron ore prices. It also benefited from a lower than expected AUD/USD where average FX prices were expected to be between $0.68 and $0.73 but instead have averaged between $0.63 and $0.67. What we're looking for is operational costs, overall margins and forward looking guidance, something that these firms have lacked in the last three financial updates.

Watch very closely for the excitement that will come from things like copper at the expense of the issues that are facing nickel lithium and other transition metals that have had really tough periods in FY24. Moving to the banks this is a sector people argue is fully valued. It's not hard to argue when through the financial year CBA made record all time highs several times and is still within a whisker of its record all time high.

Higher interest rates will indeed improve net interest margins. However, the unknown question and what we need to see at its August full year earnings is the impact higher rates are having on bad and doubtful debts, the possible increase in provisioning and more importantly the impact its having on new loans and refinancing. There is an argument to be made that banking is possibly fully priced and no matter what result is delivered won't necessarily create a leg further higher.

Finally, you can't go past consumer staples and discretionary. Retail sales numbers over the last 18 months have actually shown discretionary spending At or above 2022 levels although month on month figures have been erratic. The question that will come for discretionary spending is margins and how much sales revenue translates to the bottom line in earnings and profit.

Staples on the other hand have seen consistent movement on the revenue line but the question will be the margin and after the very targeted senate inquiry into supermarkets any sign profits are above trend may actually be met with concern as geopolitics raises its head. 33 times in 2024 the US 500 and the Tech 100 have made record highs – can it continue? Look into the US and the ending season that it is about to undertake. We have to look at several core thematics that are likely to be raised.

Artificial Intelligence (AI) The question you’ve got to ask is: is the time frame long or short? We raised this Mag 7 stocks etc Microsoft, Amazon, Alphabet, apple have clear potential. They are evolving their business models and see the integration of AI as the future of their individual businesses.

That will likely come up in their numbers but it will come with operational and initial upfront costs as the integration of AI begins. This is all long term may not fully capture short term opportunities which is still presenting very much in the semiconductor providers. NVIDIA and Advanced Micro Devices are taking full advantage and monetizing the compute cycle.

This clearly won't be forever because it will go from semiconductors to infrastructure to software and therefore the flows will move back towards the bigger end of town but overall the AI thematic still flows towards the semiconductors for now and that's likely to be shown in the earnings season that's coming. Data Centres That brings us to data centres because the potential for ensuring AI requires a heck of a lot of storage and a heck of a lot of processing. There are estimates the data centres will need to grow by 420% in Europe and 250% in the US by 2035 based on the rate of growth in AI right now.

Therefore, we need to watch providers like Dell Technologies and Intel which are big providers of data centres currently. We think the market hasn’t fully appreciated DC needs in the AI revolution. Cybersecurity The final key theme in the AI data centre technology space that we also think needs to be watched is cyber security.

It's been something along the lines of a 70% increase in ransomware attacks over the past 24 months. The regulatory requirements and the budgets required to deal with these increased threats is only just beginning. That brings players like Fortinet to the fore IT programmes and it's pensively to develop programs for enterprise makes it an interesting one going forward.

GLP-1 ‘Weight Loss’ Medicines Another theme of being a really strong driver of the S&P 500 is the rise of GLP-1 medicines. The weight loss craze that has come off the back of this Amazon has been incredible. Initially obviously developed for diabetes but having an additional effect of weight loss has created a product out of nowhere.

Eli Lilly and Co is a key player in this space with its GLP one class medicines already approved by the FDA. It's been launched in the US and its oral intake has posted adoption. It is not the only one in this space but shows very clearly the impact weight loss medicines are having on earnings.

The caveat we have though is side effects and long term impacts are still being found and could be said as a capping issue on price. Whatever way you look at it the US dating season however will be incredibly exciting and it is the reason The US markets continue to see huge capital inflows as they are much more exciting in this current environment than traditional value markets such as Australia.

If you look at equity markets in particular, you'd think everything smelled of roses. For the 47th time this calendar year US indices have made record all-time highs and 46 times at record closing highs. Earning season is underway and so far, it is doing what it always does, which is beating the Street 75 percent of the time.

Banking, Tech and industrials are the standouts. And even when you look at the 493 non magnificent 7 stocks on the S&P 500 the gap between the seven and the rest is finally starting to close up. So all is well at least that's how it appears.

However over the next 20 days the risks that are facing global markets cannot be understated. First and foremost is the US presidential election. As we point out in our US 2024 election specials, the margin between Trump and Harris has never been closer.

In fact, most probability markets now have Trump ahead. Predictit for example, Trump leads by three points and on RealClearPolitics it's even larger sitting at 10.8 points. Most of the key states or swing states are statistical dead heat but on average Trump is now ahead by 0.2 at 47.7 to 47.5.

Whichever way you look at it, whoever wins on Election Day, it will lead to disputes and the other side is unlikely to accept the result. The political upheaval will filter through into markets, and we need to be ready for that. What has also been lost in geopolitics and the incredible run in equities is movements in the bond market and the risks around US inflation.

And it is this that we need to take a closer look at. Trends and Key Drivers in US Inflation Blink and you will have missed it, the back end of the USU curve is back above 4%. This is down to several risk factors, The US presidential election being one, employment being another, and then the big one inflation rearing its head in September.

There was an unexpectedly strong rise in CPI inflation for September. So is there some going on here or is it just a false flag? First things first - Core PCE inflation continues to trend at a consistent pace of approximately 2 per cent on an annualised basis.

This suggests that inflationary pressures, while present in some sectors, remain largely in check but risks remain. So what are the keys here? Key Factors on the Inflation Outlook: 1.

Core CPI Outperformance and PCE Expectations: September's core CPI surprised with a 0.31per cent month-on-month (MoM) increase, surpassing consensus forecast of 0.25 per cent. While this unexpected rise is noteworthy, the details of the PPI (Producer Price Index) data suggest a more moderate increase in core PCE inflation, estimated at 0.21per cent MoM for the same period. The issues in the inflation figures however remain in components such as shelter and insurance, which had been driving much of the previous increases, with weather events and housing price volatility expect inflation fluctuations here to persist in the near term.

The upward surprises in the headline CPI data were concentrated in volatile categories like apparel and airfares. Airfares, for instance, rose by approximately 3 per cent MoM on a seasonally adjusted basis. 2. Wage Growth and Labor Market Dynamics: The Atlanta Fed’s wage tracker indicated that wages picked up in September, with the unsmoothed year-on-year (YoY) measure reaching 4.9 per cent, up from 4.7 per cent in August.

Additionally, the 3-month smoothed measure and the overall weighted average both rose to 4.7 per cent, compared to 4.6 per cent in the previous month. Whichever measure you want to use, real wages in the US are growing at about 2.5 per cent. While this wage growth exceeds the rate typically consistent with a 2 percent inflation target (in the absence of significant productivity gains), it remains only modestly stronger and isn't a concern, yet.

It’s worth noting that wage growth may take longer to cool off, particularly given seasonal patterns in early 2024 and the effects of recent labour strikes in sectors like port operations and aircraft manufacturing, both of which have underscored the potential for more persistent wage inflation. Interestingly, the Atlanta Fed wage data revealed a sharp deceleration in wage growth for job switchers compared to job stayers. Normally, job switchers see higher wage increases, but over the past few months, the growth rates for both groups have converged.

This shift may signal weaker demand for labour and could be a key indicator of wage trends in the coming months. However, wages for current employees may lag behind, requiring time to adjust downward, much like how rental prices for new leases often move ahead of existing rents in shelter inflation. This dynamic suggests that wage pressures might remain elevated for a time, particularly if companies raise wages for existing employees to catch up with the now-slowing wage increases for new hires.

The ongoing wage growth for current employees could also keep hiring demand subdued, as firms may focus on managing costs rather than expanding their workforce only time will tell here. 3. Potential Impact of Hurricanes Helene and Milton: The inflationary impact from Hurricanes Helene and Milton are yet to be factored into most forecasts and thus it is important to acknowledge the potential for volatility in certain inflation components. Historically, hurricanes have primarily affected gas prices by disrupting supply chains.

However, there has been only minimal upward pressure on retail gas prices so far. Demand led cost in infrastructure and construction supplies also tend to increase post hurricanes as the clean-up and rebuild takes precedence. Another major CPI component that has historically shown sensitivity to hurricane-related disruptions is "lodging away from home." For example, in the aftermath of Hurricane Katrina in 2005, lodging prices initially dropped before rebounding the following month.

It remains unclear whether the recent hurricanes will affect hotel or recreational service prices in Florida, which were among the areas impacted. September CPI already showed weaker-than-expected data for lodging, and with discretionary spending on services potentially declining, this component could face further downside risks. However, if there is an unusually sharp drop in lodging prices for October, any hurricane-related distortions might result in a bounce-back in November CPI.

This is why we think the market needs to remain cautious on core PCE inflation. Will it stay modestly higher than the Fed’s 2% target over the near term? It's clearly possible.

Then there is the ongoing volatility in certain sectors and potential risks from external shocks like hurricanes mean inflation forecasts could still see adjustments. All in all we remain vigilant that despite the enthusiasm and bullishness in indices risks are building and traders need to be vigilant.

Since writing our Thematic paper for 2025 two of the four major themes have already shook markets in 2025. One has been the inauguration of Donald Trump as president of the United States of America and he nationalistic policies the second is the AI revolution taking a massive left hand turn. With the release of DeepSeek, the AI story may actually become the biggest theme of the year (big call considering it's still January).

We also need to rethink demand and the flow of funds in the wake of DeepSeek R1 disruption. Because if open-source DeepSeek R1 model does deliver performance comparable to OpenAI’s o1 reasoning model at a fraction of the cost (VentureBeat, Jan 20), it raises critical questions for not just AI, but periphery players in the AI chains as well. Here’s why: DeepSeek R1 is reshaping investor perceptions of the AI compute investment cycle.

Reports suggest that the model achieved competitive performance using significantly fewer computing resources and lower inference costs. These efficiency gains have cast doubts on the future scale of AI semiconductor and equipment investments, leading to selloffs across semiconductor stocks. Look at NVIDIA, Meta and closer to home NextDC and the like.

We also know that in China, DeepSeek v3 has already driven AI compute cost deflation. The R1 model leverages advanced techniques like multi-head latent attention (MLA) and mixture of experts (MOE), enabling more efficient training by breaking workloads into smaller parts. This is something o1 has only just begun doing – but at a higher cost load.

While these innovations may not apply universally to all models, they signal a shift that could impact global AI training strategies. Now the caveat the tech boffins point out here is that the greater training efficiency is unlikely to reduce overall compute spending in the near term, as improvements typically fuel more inference demand. But and it is a but, economies of scale always come home to roost in the end.

The consumer will benefit – the investor needs to get picky – who is going to lead and who is going to fall by the wayside? Lets look at the Tech Gorillas like Amazon, Google, and Meta, DeepSeek R1’s efficiencies create a mixed outlook. While these firms develop proprietary models it's important to remember that they also monetise AI services through platforms like Amazon Bedrock and Google Vertex.

Lower training costs could reduce operating and capital expenditures, boosting profitability. Amazon benefits from its partnerships with external developers. Google, meanwhile, leverages its Gemini model for growth.

Meta appears best positioned, as its Llama model generates minimal direct revenue, while its announcement of a 54%-66% year on year increase in capex to $60-$65 billion in 2025 demonstrates its commitment to scaling AI capabilities. This follows news of the Stargate project, which is estimated to add $100 billion in incremental cloud-related capex. These moves underscore that demand for high-performance data centres remains robust, even as cost-efficient AI models emerge.

So what about the hardware developers like NVIDIA (NVDA), Broadcom (AVGO), and Marvell (MRVL) that have been savaged by DeepSeek’s cost efficiencies? While concerns about reduced training investment persist, long-term demand for AI compute remains robust and one player will not be enough to change that. Training requirements, particularly for inference workloads, are expected to drive growth over the next 2-3 years and no model as yet can do that without increased hardware.

The question will be margins – will hardware margins get squeezed from cost efficiencies? Then there is the memory sector, DRAM demand remains steady despite short-term pressures. TSMC, a critical player in AI accelerators, has also faced declines but remains integral to the semiconductor supply chain.

So, no real change here from DeepSeek. Where does this all leave us? The emergence of cost-efficient AI models like DeepSeek R1 introduces both opportunities and risks.

Yes, declining compute costs have mixed implications for the tech sector. On one hand, they alleviate margin pressures for software companies grappling with expensive AI features, potentially accelerating AI integration across product lines. But the risk to this is, lower barriers to entry could intensify competition from agile AI startups, challenging incumbents.

In short these innovations could reshape AI economics, the sustained demand for robust infrastructure, driven by broader AI adoption and multi-cloud trends are likely to overawe the negatives for a positive long-term outlook. Thus investors should focus on companies well-positioned to benefit from these shifts while remaining cautious of near-term volatility.

As we sit here and review the last weeks of 2024, it has dawned on us that 2024 was the year of wanting everything and getting nothing. Now that might sound like a ridiculous statement considering equities across the MSCI world are averaging double digit returns for 2024. In fact in the US they are on track for two consecutive years of 20% gains or more.

So we certainly gained something, but what we have come to realise is that 2024 was a year of anticipation and more anticipation and more anticipation but nothing being delivered particularly here in Australia. So let us put forward our reasoning. 1. RBA Rates – Pricing v the reality At the start of 2024 it's hard to believe that three rate cuts were fully priced into the cash right by December this year.

The pricing versus the reality facing the RBA in 2024 was one reason that we have probably seen muted movements in currencies and bond markets. We do need to commend the Reserve Bank of Australia (RBA) for navigating what has been a perplexing year in 2024. As mentioned, we start the year influenced by global central banks for multiple rates, driven in particular by the U.S.

Federal Reserve. However, by mid-year, pricing shifted so dramatically it moved through 189 basis points to be factoring in not one but up to four rate increases as inflation remained in a state of suspension as sticky components slow the rate of change and has seen underlying inflation holding at 3.5% and above. Despite this the RBA held rates steady throughout the year and has now adopted a dovish tone at its December meeting.

This is key – its 2024 cautious approach is seeing a 2025 pivotal shift and the board is now making it clear that its focus of managing inflation risks is starting to switch to addressing growth concerns. Market forecasting has easing beginning at the April meeting, the range from economists is February through to May 2025. Whenever it starts, the consensus between the market and the theoretical world is the same – one cut will bring several and come December 2025 the belief is the cash rate will be as low as 3.6%. 2.

Labour Market The other factor that has kept the RBA on the sidelines has been employment. IF we were to look at employment in isolation it should be championed. Underemployment, underutilisation and unemployment as a whole is – strong.

It has completely defied expectations in 2024, with employment levels reaching record highs and participation levels for the population and women in particular also at records. It should be noted that part of the reasoning for this is robust immigration, cautious corporate behaviour toward redundancies and then the big one public sector hiring. Surges in hires for education, healthcare, and hospitality, drove public sector resilience, offsetting weakness in private sectors like manufacturing, mining, and financial services.

What could force a change here is the 2025 Federal election – a minority government or even a change of government could lead to fiscal restraint and dampen employment growth, while a surprising downturn in job data could prompt the RBA to expedite rate cuts and increase the amount of cuts as well. Something traders will need to have their fingers on. 3. Record level Wage Growth Wage growth, a key concern earlier in the tightening cycle, moderated in 2024, easing pressure on policymakers both on the fiscal and monetary side.

At one point their wages were growing at levels not seen since record began. However, it did coincide with an inflation level of a similar rate meaning real wages were flat. Looking into 2025, wages remain a concern for rate watches for the following reasons: Minimum wage has consistently followed the inflation rate with a premium suggesting the will increase exceeding 3.5%.

Industrial relations reforms over the past 2 years have embedded wage rigidity. Finally accelerating wage increases in Enterprise Bargaining Agreements are now averaging 4%. Without corresponding productivity gains, these dynamics could challenge the RBA’s assumptions, complicating the path to rate cuts. 4.

Gravity defying markets Earnings multiples of the ASX 200 and its sector have soared in 2024. It’s a reflection of the optimism bordering on exuberance about peak interest rates and an imminent easing cycle. The forward P/E ratio of 17.9x is well above the 10-year average of 16.0x and significantly above its historical average of 14.2x.

Looking into 2025 – yes, these multiples are stretched, but when put into a global context it is understandable and even defendable. For example - Australian equities trade at a 21% discount to the S&P 500’s multiples and expectation for the US market in 2025 is one of further expansion. Thus to sustain these levels robust earnings growth are needed to close the P/E gap.

A 17.0x multiple down from 17.9, would meet expectations. 5. Banks being banks? One area that we note has not just defied expectations but also logic is Australian banks.

The banking sector was the standout performer in 2024. The sector outpaced the broader market by 25%, not hard when you look at CBA which has surged 40% in the past 12 months. It’s even more remarkable when you compare it to the material sector, it has outperformed its cycle peer by 50.2%.

The surge in passive investment flows (exchange traded funds and the like) which is growing at record levels, alongside superannuation sector contributions, fuelled this robust performance considering the Big 4 and Macquarie sit inside the top 20 and make up 45% of the ASX 20. However, this dominance is likely to face challenges in 2025. Key factors to watch include China’s commodity and economic outlook, shifts in risk asset performance, and potential regulatory scrutiny of superannuation’s ties to bank equity.

Coupled with stretched bordering in snapping valuations – the risks underscore the sector’s sensitivity to macroeconomic and policy developments going forward and overdone investment. 6. Iron Ore – heavy lifting Iron ore defied the forecasts in 2024. The expected collapse never truly eventuated, buoyed by cost-curve dynamics and stronger-than-expected demand in the latter half of the year.

Prices exceeded consensus estimates by upward of US$20 a tonne and provided a tailwind for materials. But, and it is a major but, China remains a pivotal factor. Broad-based policy stimulus announcements in late 2024 lifted sentiment, but execution and clarity remain uncertain.

China is looking to stimulate itself in 2025 and that will determine whether materials can close the performance gap with commodity prices in 2025. The other big unknown for Iron Ore – Trump 2.0 and his future tariffs on Australia’s largest trading partner. Signing off 2024 was a year defined by shifting dynamics across monetary policy, sector performance, and macroeconomic trends.

As we move into 2025, investors and traders will face a complex landscape shaped by earnings growth challenges, election-related uncertainties, and potential shifts in global economic momentum and policy. Successfully navigating these factors will come from understanding the macroeconomic signals and sector-specific opportunities they will present.

There's been plenty made this year about gold's incredible rise to new record levels. A point that gold bugs love to point out. As we sit here gold is trading at around US$2700oz having reached an all-time high that was just shy of US$2900oz.

Thus the question has to be asked: where is the limit? And where too from here for the inert metal? The movements over the last five years clearly suggest there is a structural change going on inside the very definition of what gold is. 14.7% in the last six months. 29.4% year to date. 34.2% in the last 12 months A staggering 82.3% in the last five years.

That is telling a story that is different to the original fundamentals we were taught at university and then as fundamental traders. Let's look at that theory: gold usually trades closely in line with interest rates, particularly US treasuries. As an asset that doesn't offer any yield it typically becomes less attractive to investors when interest rates are higher and usually more desirable when they fall.

That still technically holds true, However what has changed is how much central banks are interfering with that fundamental. Since 2022 when Russia invaded Ukraine one of the main reactions from the West was to freeze Russian central bank assets. Since that point the Russian central bank particularly has been buying gold as a form of asset store/reserve.

It has also allowed it to avoid the full force of financial sanctions placed on it. But they're not the only ones doing this; emerging market central banks have also stepped up their purchasing of gold since this sanction was put in place and are rapidly increasing their own central bank reserves. Then we look at developed markets central banks.

The likes of the US, France, Germany and Italy have gold holdings that make up to 70% of their reserves are net buyers in the current market. That suggests something else is afoot. Are they concerned about debt sustainability?

Considering the US has $35 trillion of borrowings which is approximately 124% of GDP, do central banks around the world see risk? Considering that many central banks have the bulk of their reserves in US treasuries coupled with the upcoming unconventional administration in the Oval Office this certainly puts gold’s safe haven status in another light. There are truly unknowns with the upcoming trump administration and gold is clear hedging play against potential geopolitical shocks, trade tensions, tariffs, a slowing global economy, deft defaults and even the Federal Reserve subordination risk So what is the outlook for Gold over the coming years and just how high could it go?

Consensus over the next four years is quite divided: by the end of 2024 the consensus is for gold to be at US$2650oz and then easing through 2025 to 2027 to $2475oz. However there are some that are calling for gold to reach the record reached in September this year before surging towards $2900oz the end of 2025 and holding at this level through most of 2026. And right now who could blame this prediction - Gold bugs believe the confidence in gold’s enduring appeal amid a volatile macroeconomic and geopolitical landscape is a bullish bet.

Expectations for sustained diversification and safe-haven flows do appear structural and with central banks and investors seeking to mitigate risks in an environment characterised by persistent uncertainty, geopolitical tensions, and economic volatility. And it's more than just the demand side that's leading the charge. The supply side of the equation further supports our bullish outlook.

Gold mine production is inherently slow to respond to rising prices due to long lead times for exploration, development, and production ramp-up. Furthermore, major producers avoid aggressive hedging strategies, as shareholders typically prefer full exposure to gold’s upside potential. The supportive fundamental backdrop reinforces that demand from both the official sector and consumers will remain robust, while supply-side constraints provide a natural tailwind for price appreciation.

What we as traders need to be aware of is many investors actually believe they've missed the rally and are wary of buying gold at all-time highs. There are some that believe gold is due pull back even a correction as they struggle to make sense of gold in the new world. The divergence away from yields coupled with unknowns out of China and the US has made them nervous to buy this rally.

But we would argue the pullback has probably already happened. If we look at the gold chart, since the US presidential election gold has moved through quite a reasonable downside shift. Dropping from its record all time high to a low $2530oz.

That decline has clearly been cauterised and the momentum now is clearly to the upside. We can see from the chart that spot prices are now testing the September-October consolidation period. Any clean break above these levels would see it going back to testing the head and shoulders pattern at the end of October-November.

This will be the keys to gold for the rest of 2024. But whatever happens in the short term the long-term trend suggests there is more for the gold bugs to delight in.