While markets are currently pricing in some delays in monetary easing, their base case implicitly remains that of a return to economic normality. After all, the imbalances stemming from the pandemic and the Ukraine invasion supply shocks are receding. Inflation is normalising, central banks’ balance sheets are being shrunk, natural gas and energy prices are way off their peaks, and the volatility of economic data is back to cruise level.

• Gold has risen about +30% since fall of 2023 through a series of spikes, some of which were not easy to connect with specific events or fundamentals. A combination of factors actually played out. Essentially, the rise in gold could signal a transition to a new phase of the economic cycle that might not look the same as the post-GFC era that has prevailed so far.
• For now, markets remain busy assessing when central banks will start to cut rates. Beyond temporary doubts regarding the pace of disinflation, they are pricing that rates being held at elevated levels for a while longer will ensure that the economy returns to normal.
• The surging gold price appears to disagree. With rates structurally higher than in the last decade, a shallow ‘repair phase’ looming in the absence of any serious economic dislocations, an end to the China-led global trade expansion, and shorter economic cycles will all be sources of continued uncertainty, calling for hedges.

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