Emerging Markets

We are increasing our gold price target to $2,200/oz, given the increasing risk of fiscal dominance in the US, rising geopolitical risk, the return of trading blocs and currency debasement risk. These risks also will increase economic uncertainty, which also will be bullish for gold.

There are several widespread market narratives regarding US inflation, the Fed’s policy, global manufacturing/trade and China’s recovery that we disagree with. In this report, we explain our reasoning and where it puts us in terms of investment strategies.

The Gulf’s political economy – particularly that of KSA – drives the supply side of oil-price discovery. This has been evolving since 2017, when OPEC 2.0 was formed. It is now fundamental to the market. We expect Brent to average $95/bbl this year, unchanged from last month, and $115/bbl (up $5/bbl vs. last month). WTI will trade $4-$6/bbl below Brent over the forecast interval. We remain long the XOP and COMT ETFs.

No, the secular rise in geopolitical risk has not peaked. EU-China trade ties underscore the multipolar context, but this multipolarity is unbalanced, as the US has not reached a new equilibrium with its rivals. While the second quarter is murky, investors should stay defensive this year on the whole.