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Bitcoin has risen 20% in the past four weeks, hitting an 18-month high, boosted by speculation that interest rates have peaked and hopes for a major Bitcoin ETF launch. Other than bargain hunting in the Russell 2000, up 1.0%, US equities were down on profit-taking. Gold took a pause and stepped from recent all-time highs. The oil price continued its downward move despite last week’s announced OPEC+ production cuts.

The Dow Jones made another all-time high of 36,265 in morning trade, despite Fed chair Powell trying and failing to talk down hopes that interest rates will be cut in the spring. Gold rose 1.6% to a new all-time high of $2,089 per ounce. Paradoxically, weaker manufacturing data, and the belief that interest rates have thus peaked is the best explanation.

The Dow Jones achieved an all-time high of 35,802 in afternoon trade, signifying the equity market’s bullish tone spurred by hoped-for interest rate cuts. Traders are placing a 40% probability of a March rate cut in the Fed Funds rate. The Fed’s favored inflation measure cooled to 3.5% annual growth, welcome but still above its 2.0% target.

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Gold stood out again, rallying within a few dollars of its August 2020 all-time high of $2,075, with supporters arguing that a peak in nominal and real interest rates would underpin a continuing bull market. Oil prices also continued to recover despite no news on next year’s production quota from OPEC. The Vix fear index continues to trade near multi-year lows, reflecting growing confidence that the economy can have a soft landing in 2024, with the Fed expected to cut rates by mid-year, even though it continues to insist that will not be the case.

Gold is knocking on the door of record highs heading into what has recently been an extremely strong period for bullion prices. But having rallied so hard since early October, it comes across as being priced for perfection near-term.

Gold continued to impress, up 1.4% to $2,040 (versus a one-year high of $2,085). Oil spiked 2.2% to $76.5 per barrel. Today’s consumer sentiment and holiday spending data were very strong. Two Fed governors indicated different opinions on official interest rates: Michelle Bowman thinks the Fed will have to raise rates further to bring inflation down, but Christopher Waller said he believes current rates are about right. Stocks again made little progress, with the economically sensitive Russell 2000 off 0.6%.

Thanksgiving in the US has made for a very quiet second half to the week for traders, but with a key US inflation report and an OPEC meeting on tap then volatility is expected to return next week. Also note that Australia releases inflation figures which could be the deciding factor as to whether the RBA hold or hike at their final meeting of the year.

Oil prices were volatile as news emerged of wrangling between Saudi Arabia and other OPEC+ members, with the growing suspicion that the Kingdom wants higher prices to be achieved through further production cuts. Sterling continued its recent rally after a growth-inclined budget statement and a worsening inflation outlook, pointing to higher UK interest rates for longer.

The prospect of another rate hike from the Reserve Bank of Australia (RBA), a crackdown of speculative forces in iron ore futures markets and failure to clear a stubborn resistance level has Australia’s ASX 200 facing the prospect of renewed downside.

Equity markets acknowledge little risk in coming months, judged by the Vix, Wall Street’s fear index, which dipped to a decade low of 12.9. Whether this is bullish, bearish, or has no real message is unclear. Elsewhere, the Russell 2000 and Nasdaq were up 0.7%, the dollar rallied, and Gold held above the $2,000 mark. Oil prices fell 1.0% despite the likelihood that OPEC+ will extend supply cuts.

Fed minutes of its last meeting dampened hopes of early interest rate cuts after lunch, with the cyclical and small-cap Russell 2000 off 1.1% and Nasdaq off 0.6% despite some AI-linked stocks rallying. Elsewhere, gold passed the 2K mark for the first time since May, but the rally in Oil wasn’t sustained. Sterling was firmer against the dollar on the eve of the UK Budget.

Nasdaq stepped back into its role as a market leader, up 1.2% in morning trade, even though the senior team at OpenAI jumping ship to join Microsoft was the only headline from the sector. Bonds rallied modestly on further talk about early interest rate cuts on last week’s inflation-friendly data run. Oil’s resurgence was the big story, up 2.7%, on expectations of more OPEC+ production cut following recent sharp price losses.

Gold has traded in a $61 range over the past fortnight and now holds around $1,970. Silver has been more positive; after dropping towards $22, it rallied hard to more than $24 before easing. While gold’s range was 3.2% (as a percentage of the low) over the week, silver’s was 10.3%, more significant than the average 2.0-2.5 beta, and much of the silver move looks like short covering.

Bullish factors Uncertainty about the viability of budget targets in 2024 may increase risk premium requirements by investors for Brazilian assets and diminish foreign investments, weakening the real. Argentine elections can increase the perception of risks for other countries in the region and temporarily decrease managed money for Brazil, weakening the real. Bearish factors Disclosure of the minutes of the FOMC decision can reinforce the perception that American interest rates have already peaked and contributed to weakening the dollar.

Gold faces an interesting start to the week with the US dollar falling to fresh two-month lows ahead of a key US Treasury auction, the latter providing an obvious catalyst that could dictate whether we see a retest of resistance above $2000.