Gold prices and U.S. equities posted moderate losses as the curtain rose on the first trading week of 2024, pressured by a significant rally in Treasury yields and a rise in the U.S. dollar, a move that was bolstered by the strong December U.S. jobs report.
In late 2023, traders got ahead of themselves and priced in deep rate cuts for the coming year. While the U.S. central bank signaled it would cut borrowing costs over the medium term, economic resilience and extreme easing in financial conditions could delay the start of the easing cycle, setting up markers for a deeper reversal in the coming weeks.
If the typical mean reversion of returns unfolds, gold and risk assets could be in for a rude awakening after their strong performance in the fourth quarter. The euro, British pound and Japanese yen could also weaken against the greenback, erasing some of the gains of the latter stages of 2023.
Different and complex market dynamics are likely to play out at the onset of 2024, creating attractive trade opportunities and setups for key assets. For a deeper dive into catalysts that could affect currencies, commodities (gold, silver, oil) and cryptocurrencies in the near term, check out DailyFX’s Q1 technical and fundamental forecasts.