Daily Brief - Golden Heights

TLDR: In an eventful week for financial markets, gold has once again captured headlines, setting a new record high.

Gold's latest peak at $2,304.96 an ounce comes amidst growing anticipation that the Fed might lower rates later this year. Such expectations were bolstered by Chair Powell's recent comments, suggesting a potential shift in monetary policy to ease borrowing costs "at some point this year."

The prospect of lower interest rates is particularly significant for gold because the opportunity cost of holding gold diminishes. Lower rates decrease the yield on bonds and savings, making gold more attractive in comparison. Moreover, lower interest rates often lead to a weaker dollar, enhancing the appeal of gold as an investment.

Since mid-February, gold has been on a relentless upward trajectory. This rally is not only fueled by geopolitical tensions, particularly in the Middle East and Ukraine, but also robust central bank demand.

Recognizing gold's value as a hedge against uncertainty and a key component of national reserves, central banks have been consistent buyers. The World Gold Council's recent report highlights a nine-month streak of gold accumulation, with China leading the charge, followed by active purchasing by India and Kazakhstan.

As we turn our gaze forward to the upcoming release of nonfarm payroll data, this critical barometer is bound to influence gold's short-term direction.

Scenario Spotlight: Impact on SPX

In the previous 19 episodes where Gold Futures rose 25% in 6 months, the S&P 500 historically tended to rise in the following 3 months - delivering ~4% on median, with chances of downside risk in the near term.

Market Movers: When Gold futures rally:

Here are the best and worst performing sectors when Gold futures have historically risen 25% in 6 months:

The top 3 performing sectors on a 1-month horizon:

1. Real Estate with an average return of 1.69%
2. Industrials with an average return of 1.27%
3. Consumer Staples with an average return of 0.73%

The bottom 3 performing sectors on a 1-month horizon:

1. Health Care with an average return of -1.09%
2. Materials with an average return of -1.34%
3. Energy with an average return of -2.56%

Asset Spotlight: Big move down in Prologis

In the past 10 similar occasions where Prologis stock saw a big move down, Toggle's analysis reveals the stock tends to see a median upward movement in the following 1 month.

Prologis specializes in logistics real estate, leasing, developing, and managing distribution facilities worldwide. Their properties, located near major transportation hubs, support the global supply chain by providing efficient spaces for e-commerce, retail, and manufacturing companies.