Gold follows Bitcoin into fresh high as markets look ahead to 2024 rate cuts

• Yesterdays gains prove fleeting, as markets take cautious approach
• ECB take centre stage, with potential Lagarde pivot in play
• Gold follow Bitcoin into record high on dollar weakness

European markets are taking a more cautious approach in early trade today, with traders waiting patiently for the upcoming ECB and US jobs report uncertainty to clear. Thus far March has seen utilities outperform in the US, with the tech sector increasingly coming under pressure as Alphabet, Tesla and Apple all hit multi-month lows. The underlying weakness within the Nasdaq can be seen through classic breadth metrics, with the number of stocks trading above their 50-day average falling to a four-month low of 50% on Tuesday. Today sees Joe Biden take aim at Trump’s policies, with his team using the state of the union address to target the Republican’s policies following yesterday’s exit from Nikki Haley. 

The ECB comes into focus this afternoon, with Christine Lagarde under increasing pressure to show her cards given the expectation that we could see the bank cut rates in the months ahead. Last week’s higher-than-expected inflation gauge may have deterred some from expecting too much from Lagarde, but the pathway back down to target remains clearly defined over the coming months as base effects continue to play out. With inflation potentially set to fall back below 2% next month, there is a possibility that today marks a step change in tone from the ECB, with their patient approach resulting in a mere 20% market expectation of a rate cut next month. That could change drastically if inflation does indeed fall back below target prior to their next meeting.

Gold has followed Bitcoin into a record high following comments from Fed Chair Jay Powell at the semi-annual monetary policy report in Washington. Despite a somewhat cautious approach, Powell’s confidence that we will see monetary easing over the course of this year sparked a fresh move lower for the dollar. With the greenback coming under renewed pressure, we have seen commodities come back into favour, with Gold, Silver, Palladium, and crude all pushing sharply higher. This boost for so-called non-fiat assets sets the stage for a potentially lucrative year ahead for Crypto and precious metals should the dollar lose further ground.