The latest move by the Federal Reserve has affirmed that tackling inflation is the number one priority of the Federal Reserve, even if it means bringing the US into what’s called a ‘hard’ landing. A hard landing is when growth is hindered so badly by rising interest rates that the economy comes to a sudden and abrupt halt as debt repayments increase, mortgage payments rise, property valuations sink, and stocks slide rapidly lower.
One commodity that is touted as a stagflation hedge is gold, but the surge in real yields and the USD has kept gold, silver, and platinum pressured. Nevertheless, gold can potentially gain in the stagflation environment.
How can seasonals potentially help you with timing your entries? Over the last 25 years, from the end of September to the start of December, gold has shown a mixed seasonal pattern. However, if we look at this pattern from December 24 to February 20 we can see that gold may show a positive outlook at this time of the year.
Major Trade Risks: If the USD and real yields stay firm then gold can continue to track lower despite its seasonal pattern.
HYCM clients can access the Seasonax product in order to analyse over 25,000 currency pairs, indices, commodities, as well as individual stocks. Please contact your account manager for a free trial. Certain products & services mentioned herein may or may not be available to all clients depending on which HYCM Capital Markets Group entity their trading account(s) adheres to.