As the dollar strengthens, Treasury yields climb, and gold grapples with heightened volatility, markets are left speculating on what the year’s end may hold.
As the year winds down, global markets are once again steeped in uncertainty, with the dollar, gold, and US Treasuries commanding renewed attention.
The U.S. dollar continues to demonstrate resilience, bolstered by weaker global currencies and the resurgence of the "Trump factor".
Meanwhile, gold remains volatile, pulled in opposing directions by market forces. Lastly, Treasuries act as a critical gauge of inflation expectations and potential Federal Reserve moves.
The question looms: What direction will these key assets take as the year concludes?
The Dollar: Maintaining Dominance
Despite turbulence in currency markets, the dollar retains its strength.
Its upward momentum is underpinned by factors such as rising US Treasury yields and its relative attractiveness against other major currencies.
The euro, for instance, has struggled amid concerns over a possible return to protectionist policies under Donald Trump.
During his previous tenure, Trump imposed tariffs and strained U.S.-Europe trade relations, and the prospect of similar actions is rattling confidence.
The British pound faces comparable pressures, while the Japanese yen has rallied, benefiting from a classic flight-to-safety play as Asian equities falter.
Trump’s trade policies—centered on tariffs and restrictions—add further strain to an already fragile global economy.
This uncertainty pushes investors toward the dollar, which remains the world’s ultimate safe-haven currency.
Fears of escalating tensions between the U.S. and its trading partners are only intensifying the demand for greenbacks.
Gold: The Markets’ Fear Gauge
Gold, traditionally viewed as a barometer of market anxiety, has exhibited mixed signals.
Although gold and the dollar typically move inversely, the recent dynamics have been anything but straightforward.
Volatility reigns, with the GVZ (Gold Volatility Index) trending higher, reflecting market indecision and shifting investor sentiment.
The precious metal has alternated between sharp declines and sudden rallies, indicative of a market struggling for direction. Gold faces headwinds from both the strong dollar and rising Treasury yields, which heighten the opportunity cost of holding this non-yielding asset.
The pressing question is whether gold can still be trusted as a reliable safe haven in today’s market environment.
Treasuries: A Classic Reaction
US Treasuries have behaved predictably amid the market’s shifting tides.
Rising yields, fueled by inflation concerns and speculation of a cautious Fed at its next meeting, have driven down bond prices.
This dynamic has reinforced demand for dollars, adding to the greenback’s upward trajectory.
Higher Treasury yields further diminish gold’s appeal, exacerbating its volatility.
At the same time, these yields reflect persistent inflation expectations, potentially forcing the Fed, led by Jerome Powell, to maintain its hawkish stance longer than markets initially anticipated.
Macro Analysis: A Waiting Game
Broadly, the market is in a state of heightened greed, though the CME Fear & Greed Index suggests levels haven’t yet reached extremes. This leaves markets vulnerable to surprises, as investors wait for clarity on Donald Trump’s next moves and the Fed’s December FOMC meeting.
The CME FedWatch Tool shows a slim chance of a rate cut, signaling that investor expectations are converging on a scenario where rates remain unchanged.
If Trump pushes forward with protectionist policies while Powell opts to hold rates steady, the dollar and Treasury yields could both benefit.
Conversely, if markets have overestimated Trump’s inflationary impact and Powell pivots toward a rate cut, a flight from the dollar is likely, with rippling effects across asset classes.
Technical Analysis: Decoding the DXY
A technical analysis of the Dollar Index (DXY) offers additional insight.
After breaking the critical 106 level and peaking at 108, the DXY is now in a pullback phase, mirroring broader market uncertainty.
Indicators point to an overbought condition, suggesting caution. However, the DXY’s next moves hinge on Fed policy and U.S. economic signals.
A global economic slowdown or a spike in geopolitical tensions could reignite upward momentum for the dollar.
Original article published on Money.it Italy 2024-11-28 09:40:29. Original title: Dollaro, oro e Treasury USA: cosa aspettarsi entro la fine del 2024?
