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Gold prices surged past $3,000 per ounce for the second time in a week, driven by investor demand for safe-haven assets amid US trade policy concerns and a weakening dollar. Spot gold reached $3,008.08, while U.S. gold futures climbed to $3,017.60, reflecting heightened market uncertainty following proposed tariffs by President Trump.The US dollar index remained near a five-month low, enhancing gold's appeal to non-dollar holders. Since the start of the year, gold has risen over 14%, marking 14 record highs since January, as investors brace for updated economic projections from Federal Reserve officials. Other precious metals also saw gains, with silver, platinum, and palladium all increasing in value.
Fund managers have made a record shift away from US stocks, with allocations dropping 40 percentage points to a net underweight of 23%, the lowest since June 2023. This shift follows a significant decline in investor sentiment, attributed to a weakening economy and trade war tensions, as the MSCI AC World index fell 3.1% this year. Cash allocations rose sharply, indicating a move towards safety, while expectations for global economic growth have soured, with 63% of investors anticipating a downturn in the next year.
The Bank of England's Monetary Policy Committee is expected to maintain the Bank Rate at 4.5% during its March 2025 meeting, reflecting a cautious approach amid economic uncertainties. Recent data shows a contraction in the UK economy and persistent inflation pressures, influencing market expectations for future rate cuts later in the year. British stocks, the pound, and government bonds may experience volatility as investors react to the MPC's guidance and economic projections.
The Federal Reserve is expected to maintain the federal funds rate at 4.25%-4.50% during its March meeting, reflecting a cautious approach amid mixed economic signals. Key indicators, including consumer sentiment and inflation trends, will influence future policy decisions, with potential rate cuts anticipated later in 2025 if economic conditions permit. Market reactions will focus on the Fed's tone and updated economic projections, particularly the "dot plot," which outlines members' expectations for future interest rates.
Morgan Stanley strategists believe the S&P 500 will see a tradable rally, with 5500 serving as a crucial support level after recent declines. They note that the index is in oversold territory and expect improvements in sentiment and seasonal trends, despite ongoing policy uncertainties that could impact growth. The firm maintains a year-end target of 6500 for the index, while monitoring key economic indicators to gauge recession risks.
US stock markets experienced a relief rally despite a significant drop in consumer sentiment, with the Wall Street index losing 3.1% for the week. Political developments alleviated government shutdown fears, but recession concerns resurfaced following comments from Treasury Secretary Scott Bessent. Attention now turns to the upcoming FOMC meeting, where the Fed is expected to maintain interest rates at 4.25% - 4.50%.
AUD/USD ended last week at 0.6326, marking its fifth gain in six weeks, driven by concerns over US trade policies and improving risk sentiment. Key influences this week include US trade policy, interest rate meetings, and Australia's employment report, expected to show a gain of 20,000 jobs with the unemployment rate steady at 4.1%. A stronger jobs report could lead the RBA to hold rates steady in April, while technical analysis suggests potential for further gains towards the 200-day moving average at 0.6525-0.6535.
US inflation data for January revealed a 3% annual increase in the Consumer Price Index, surpassing expectations. This uptick, driven by rising costs in transportation and healthcare, diminishes the likelihood of a Federal Reserve interest rate cut, leading to a negative reaction in US equities and a strengthening dollar. Treasury yields also rose, reflecting market concerns over persistent inflationary pressures.
Bitcoin faces high tension ahead of US inflation data, with investors hopeful for signals of interest rate cuts. The core inflation rate may drop to 3.10%, potentially fueling rate cut expectations, while Thursday's producer price data could influence market movements. The psychological $100,000 mark remains pivotal, with potential declines towards $90,000 if monetary policy disappoints, while sustained gains above $100,000 could lead to a record high near $109,300.
Jerome Powell faces intense scrutiny from Congress shortly after Donald Trump's inauguration, amid rising inflation concerns and pressure for interest rate cuts. With PCE inflation at 2.8% and consumer confidence declining, Powell is expected to advocate for patience before making any policy changes, awaiting clearer impacts from the new administration's strategies.
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