Year-to-date Gold returns are currently staging their third-best performance since 1980, and, in reality, are only a rounding error away from the best all-time performance in the last 44 years.

A rounding error away from the best all-time performance

“While we can argue that fund FOMO is hard to account for, there is evidence of notable OTC interest in physical markets hitting the tapes with BOE Gold simultaneously trading tight. Since the Fed kickstarted its easing cycle with a 50bp cut, commodities prices, inflation swaps, and US long-end yields have simultaneously risen, and have even outpaced the rally in risk assets by some measures.”

“The cross-section of commodities prices continues to send signals of significant improvement in demand expectations, and while survey-based measures of consumer confidence are deteriorating, consumer spending patterns have remained strong. While this could easily ultimately be seen as an overreaction to the Fed's 50bp start to its cutting cycle, a persistence in this trend could signal more worrying signs that it may not be as easy as the Fed hopes to bring rates lower without reflation.”

“Conversely, if these trends simply reflect an overreaction to the start of the easing cycle, then it is worth highlighting that in the years that followed such a remarkable performance in Gold, drawdowns for the following year have averaged -27%.”