Economists at TD Securities see rising risks that the Federal Reserve will deliver a hawkish surprise to markets, which could further sap interest from a cohort of participants who view the Fed's hiking path as being behind the curve on inflation.
Gold remains vulnerable to a deescalation in the war in Ukraine
“An inverting yield curve is bringing back whispers of a recession on the horizon. This comes as rates markets are readying for the Fed to deliver a hawkish surprise to markets, sending a strong signal that markets are increasingly pricing in a Fed that is willing to overshoot the neutral rate in order to bring inflation under control.”
“While the yield curve may be bringing back whispers of a looming recession that could re-ignite investor interest in gold, ETF flows have not historically been strongly associated with the yield curve during a hiking cycle. This suggests that the strong ETF inflows have rather been associated with safe-haven appetite, which leads to downside risks as the negotiators continue to work towards a ceasefire.”
