Thierry Wizman, Director: Global Currencies & Interest Rate Strategist at Macquarie, discusses the path ahead for the Fed and the geopolitical headwinds driving FX moves.
The dollar’s recent stabilization has stripped away the easy narrative that powered the early signs of the debasement trade through the summer. Gold and crypto are now consolidating after an overextended run.
By early October, gold was trading more than two and a half standard deviations above its recent average — a statistical sign of one-sided positioning. The rally then lost steam as fresh buyers began to thin out.
Bitcoin traced a similar path, holding firm but no longer accelerating, while in the background the dollar steadied after months of decline. What was a one-way hedge against perceived fiat weakness is turning into a more balanced market as currencies adjust to a steadier backdrop.
The unwinding of earlier crowding into gold and crypto as the dollar eased now appears to be the main force behind price action. Gold and Bitcoin’s momentum have been closely aligned in recent weeks, with a correlation of about 0.6, while gold’s z-score has risen alongside the dollar’s by a similar magnitude. While they’re diverging, bullion and the greenback are moving in sync, and that’s a sign that positioning rather than macro fundamentals is setting the tone.
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