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👉 Gold says there will be no rate cuts yet
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You should not count on a rapid decline in interest rates in the United States - there are no real economic factors for this process. This is indicated by the ratio of market prices of copper to gold and the yield of two-year US government bonds.
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Derivatives market takes into account the first reduction in European interest rates in April (by 0.25%) and believes that this "happiness" will visit us at least 5 times during the year. As for the US, investors here also predict 5-6 reductions, but this will take much more time. But the first correction in March is unlikely; most likely, we will have to wait until May.
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Recent rhetoric from the ECB and the Fed indicates that market expectations are overly optimistic. Traders often disagree with central banks and often end up being right, but this time things may be different.
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Over the past 30 years, the correlation between the Copper/Gold Ratio indicator and the yield on two-year US government bonds has generally exceeded 40%, and very rarely has it been negative.
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The usual logic: copper is one of the most important industrial metals, and its price tends to rise when the economy is doing well. Gold, on the other hand, is considered a haven asset that tends to rise in price amid economic slowdowns and lower interest rates. The relationship between the prices of these metals will show the real mood of the market.
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Let us remind you: in correlation, it is the direction that is important, not the absolute value. The moment of excessive market optimism regarding interest rate correction should be used to reformat your portfolio.
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Now the Copper/Gold Ratio is reaching new highs, and the yield on two-year Treasuries has decreased. A sharp upward reversal of this correlation means that smart money is leaving American securities. Investors are pouring capital into the dynamic technology sector in favour of safe-haven assets such as gold and the yen.
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Profits to y’all!