Gold in an unusual jump: The dramatic move by the US Treasury

Global capital markets are currently dealing with significant fluctuations following surprising economic decisions and tensions between countries. From a comprehensive analysis published by Julius Baer researchers, an interesting picture emerges regarding the direction in which gold, oil, and bond prices are heading in the near future.

A surprising decision by the US Treasury to double bond purchases sent US bond yields and the dollar downward. In response, gold and silver prices recorded unusual increases of more than 4% during the day.

This proves the absolute focus of these markets on the dollar and bond yields. Although this move does not signal actual control over the yield curve, metal markets may interpret it as a ceiling on long-term yields that reduces the risks of price declines. In light of this, Julius Baer remains optimistic about gold and is raising forecasts.

The price target for gold for 3 months was raised to $4,500 per ounce, the price target for gold for 12 months was raised to $4,800 per ounce, the price target for silver for 3 months was raised to $65 per ounce, while maintaining a neutral position regarding this metal. The price target for silver for 12 months was raised to $67.5 per ounce. And in the oil market, inventories are stable despite the international war.

The chances for a quick diplomatic solution in the Middle East have disappeared into the fog of war; the reality on the ground indicates that the world is not about to run out of oil. Inventory levels in the world and in the United States are holding up better than initial concerns. There are several explanations for this situation.

There is weakness in demand for oil, the flow of shipments through the Strait of Hormuz continues openly and covertly, and oil transport continues in large volumes using small ships that bypass the Strait of Hormuz. Since the supply shock is more moderate than expected, oil prices are expected to fall to the $70s this year and to the $60s next year. The bond market is concerned about borrowing costs.

The timing of the US Treasury's announcement on increasing bond purchases is considered unusual, as it was published only two weeks after the quarterly financing announcement. This indicates that the Treasury is concerned about the rise in long-term borrowing costs and is prepared to act against them.

At the same time, inflationary pressures are expected to weaken, so there is no expectation that the Federal Reserve will raise interest rates. In terms of investment strategy, the recommendation is to maintain exposure to duration in the intermediate segment of 5 to 10 years, preferably through high-quality corporate debt.