Navigating Shifting Sands: Recession Risks and Global Commodity Trends

• Recent indicators point to a surprising decrease in the risk of recession, with the ‘Macro Fever Curve’ dropping from 100% to 86% and the ‘Heart Beat’ falling from 83% to 74%.
• These shifts have significant implications for trading in precious metals, with a notable contrast between activity in Shanghai and London/Chicago.
• While Chinese investors have eased their buying frenzy, Western investors appear to be quietly accumulating assets, potentially indicating short covering.

Explore the latest shifts in global commodity trends and recession risks, and understand how these changes are influencing trading in precious metals across different markets.

Recession Risks: A Surprising Downward Trend

Despite the outcome of last Friday’s US labor market data, our indicators for the risk of recession have fallen surprisingly over the past few days. The ‘Macro Fever Curve’ fell from 100% recession risk to 86%, and the ‘Heart Beat’, which tends to analyze the longer-term indicators of recession risk, has fallen from 83% risk to 74%. This shift could potentially disrupt expectations of an interest rate cut.

Trading in Precious Metals: A Tale of Two Markets

These changes in recession risks are impacting trading in precious metals, with distinct differences observed between Shanghai and London/Chicago. In Shanghai, Chinese investors have somewhat tempered their buying frenzy. This is reflected in the gold ETFs traded in Shanghai, with the number of outstanding gold ETFs with physical backing nearing an all-time high. In contrast, investors in London/Chicago have paused their distribution and seem to be standing on the sidelines. The trend of profiting from higher prices by taking profits appears to be less prevalent among Western investors. Instead, the ‘after open action’ suggests that Western investors are beginning to accumulate in the background, possibly indicating short covering.

Conclusion

As the global economy navigates shifting sands, the risk of recession appears to be decreasing, and trading in precious metals is evolving in response. While Chinese investors are easing their buying frenzy, Western investors seem to be quietly accumulating assets. As these trends continue to unfold, investors and traders alike will need to stay attuned to these shifts to navigate the global commodity landscape effectively.