Today's session has seen considerable volatility in both equity, commodity and metals markets. Precious metals like gold and silver stand out, where Trump's victory supported profit-taking, driven in part by a strengthening dollar, Trump's declared fight against the U.S. deficit and an expected (at least temporary) decrease in geopolitical tensions. The newly-elected president announced that he would seek to extinguish existing military conflicts and attempt to manage the dynamics of conflicting interests with China.
- Donald Trump has announced that he will stabilize the US fiscal budget and reduce the deficit. The prospect of changes in this regard puts pressure on gold and silver and brings more uncertainty to the metals market.
- Markets have withdrawn some bets on US rate cuts, next year. They are currently estimating 'only' 100 bp cuts by September 2025. Investors are slightly reducing their bets on the size of Fed rate cuts this year, they are currently fully pricing in only one 41 bps rate cut by the end of the year (Fed meetings in November and December).
- Markets expect Trump to actually take on the US government debt. S&P Global Market Intelligence noted that U.S. 5-year CDS fell to 33 basis points, the lowest level in at least a year, from 44 basis points at the previous close.
In addition to silver and gold, where we're seeing profit-taking pressure, we're also seeing spreading weakness among industrial metals, with 10-year U.S. Treasury bond yields rising today by 16 bps to 4.45% Declines in China's stock market are putting additional pressure here. Copper retreated 3.8%, against 4% declines in zinc and a nearly 3% retreat in aluminum.
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Source: xStation5
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