At 0.22 (vs 0.64 last week), our Risk Index moved back into neutral territory. Better sentiment was well reflected in falling credit spreads, lower safe haven assets such as gold and underperforming defensive stock market sectors such as utilities.
Elsewhere, gold has been under pressure this week. While the yellow metal benefitted hand in hand with easing risk aversion for most of the last few months, conditions have been changing of late. This may be on the back of liquidity expectations failing to rise further, which has been reflected in the stabilising USD rate advantage. This makes sense with the focus shifting to politics rather than additional central bank policy action and as better than feared data of late has been helping to support medium- to long-term rates. Furthermore, it seems to have become consensus that the Fed is unlikely to consider a more dovish policy stance ahead of the US presidential election.
We do not exclude additional corrective downside risk in gold (USD/oz) in the short term. Our long-term view, however, stays constructive.
Elsewhere, gold has been under pressure this week. While the yellow metal benefitted hand in hand with easing risk aversion for most of the last few months, conditions have been changing of late. This may be on the back of liquidity expectations failing to rise further, which has been reflected in the stabilising USD rate advantage. This makes sense with the focus shifting to politics rather than additional central bank policy action and as better than feared data of late has been helping to support medium- to long-term rates. Furthermore, it seems to have become consensus that the Fed is unlikely to consider a more dovish policy stance ahead of the US presidential election.
We do not exclude additional corrective downside risk in gold (USD/oz) in the short term. Our long-term view, however, stays constructive.
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