Elite Research | 22.03.2025

AUD Macro Breakdown

1. RBA Monetary Policy Outlook

Short-Term (0–3M):
The Reserve Bank of Australia (RBA) has begun a shallow rate-cutting cycle, described as a "hawkish cut" in Q1 2025. While inflation is moderating, it remains within the upper half of the 2–3% target band, keeping policymakers cautious. Labour cost growth is elevated, and weak productivity growth adds to inflation persistence. This dynamic limits the RBA's ability to ease aggressively.

Medium-Term (3–12M):
Markets have priced in approximately 60bps of rate cuts by year-end, but there is skepticism about how far the RBA will follow through. Additional cuts are conditional on a sustained decline in core inflation and clear evidence of economic slack. Political parties’ proposed fiscal stimulus packages could offset some monetary easing, injecting positive demand into the second half of the year.

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2. Inflation Dynamics

Short-Term:
Trimmed mean inflation is tracking within the target band but remains near the top end. Rent inflation is slowing gradually, while tight labour markets and low productivity continue to support inflation through higher unit labour costs.

Medium-Term:
Inflation risks are two-sided. A slowdown in global trade and rising unemployment could ease inflation, while stronger domestic demand and housing-related fiscal stimulus may slow the disinflation path. The RBA expects inflation to decline gradually but is alert to potential persistence in services and wage-driven components.

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3. Labour Market and Wages

Short-Term:
Despite a recent decline in employment, the labour market remains tight. The unemployment rate is low at around 4.1%, and underemployment has fallen to its lowest level in over 16 years. Participation fell, suggesting the drop in employment is more supply-driven than demand-driven.

Medium-Term:
Wage growth remains firm and productivity is low, reinforcing inflationary pressures. Labour demand is still strong, especially in services. The RBA will be reluctant to ease into this backdrop unless clearer signs of labour market weakening emerge.

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4. China and External Demand

Short-Term:
Investor sentiment toward China has improved, with stimulus measures and investment in technology and infrastructure boosting demand for Australian exports like LNG and base metals. However, demand for iron ore and coal remains under pressure due to continued weakness in China's property sector.

Medium-Term:
Australia remains highly exposed to China across trade channels. While direct exposure to new US tariffs is limited, China’s vulnerability to global trade measures could indirectly impact Australian exports. A rebound in Chinese industrial activity would support Australia's commodity-linked income, but this remains conditional on sustained policy support and improved domestic demand in China.

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5. Fiscal Policy and Political Outlook

Short-Term:
Ahead of the May federal election, both major parties have proposed significant spending packages focused on infrastructure, housing, and energy. These plans represent a sizeable fiscal impulse in the near term.

Medium-Term:
Fiscal expansion is expected to support domestic demand in H2 2025. If implemented, large-scale spending could reduce the need for monetary easing or even limit its effectiveness. The possibility of a minority government involving smaller parties could result in more aggressive fiscal expansion, with implications for inflation and long-term debt dynamics.

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6. Global Risks and External Shocks

Short-Term:
US reciprocal tariffs set for implementation on April 2 do not directly target Australia. Tariff differentials are modest, and direct economic impact is expected to be minimal. However, a broader deterioration in global trade conditions could weigh on risk sentiment and indirectly affect Australia via China and commodity demand.

Medium-Term:
Trade fragmentation, geopolitical uncertainty, and volatility in global demand for energy and metals remain key external risks. While Australia’s energy export mix provides some resilience, a broader slowdown in global trade or Chinese activity would challenge growth and external balances.

Conclusion
The economic outlook for the AUD is underpinned by cautious monetary policy, sticky inflation, and supportive fiscal plans. China remains a key swing factor through the trade and commodity channels. While domestic fundamentals appear stable, the currency's macro outlook is balanced against external risks and policy divergence through mid-to-late 2025.

CAD Macro Breakdown

1. Bank of Canada (BoC) Policy Outlook

Short-Term (0–3M):
The Bank of Canada is maintaining a cautious stance on policy. Recent commentary suggests the BoC is prepared to act "quickly and decisively" if downside risks materialize, but for now, it prefers to wait for more clarity. The recent tariff turbulence and uncertainty around the growth outlook have led to a more data-dependent tone.

Medium-Term (3–12M):
Markets are pricing in modest rate cuts later in 2025, but the BoC has not committed to a clear easing path. The central bank remains focused on inflation risks and is wary of loosening too early, especially with fiscal policy potentially becoming more stimulative. Any significant deterioration in consumer demand or employment could tilt the BoC toward easing.

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2. Inflation and Consumer Demand

Short-Term:
Headline inflation has been gradually easing, but core inflation remains sticky. The BoC has expressed concern about upside risks, particularly if tariffs increase consumer prices or cause second-round effects through wages and expectations.

Medium-Term:
The outlook is clouded by competing forces:

• Tariffs may push inflation higher in the near term
• Weakening domestic demand and high household debt could restrain inflationary pressures
• The BoC’s base case is that inflation will return to target in the second half of 2025, but that path remains uncertain

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3. Labour Market and Wages

Short-Term:
The labour market remains resilient, but signs of softening have begun to emerge. Job growth has slowed, and job vacancies have decreased. Wage growth remains elevated, particularly in services, keeping pressure on inflation.

Medium-Term:
If the labour market shows more definitive signs of loosening—such as rising unemployment or a sharper decline in vacancies—the BoC will likely gain more confidence to ease policy. Until then, elevated wage growth remains a key concern.

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4. Oil Prices and Trade Exposure

Short-Term:
Higher oil prices have recently offered mild support to domestic revenues and trade balances, benefiting the energy sector. However, the net impact of sanctions and global trade uncertainty remains difficult to gauge.

Medium-Term:
The trajectory for Canadian exports remains sensitive to global energy demand and US-China trade frictions. Domestic energy production has remained stable, but price volatility and pipeline capacity constraints are medium-term risks. A prolonged global slowdown would weigh on Canada's terms of trade.

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5. Fiscal and Political Environment

Short-Term:
Local media reports suggest a federal election could be called by May, introducing a layer of uncertainty. The government is likely to adopt pre-election spending measures aimed at households and public services, which may support short-term growth but also complicate monetary policy coordination.

Medium-Term:
A change in leadership or policy stance could result in either fiscal expansion or retrenchment, depending on the outcome. Should spending increase meaningfully, the BoC may face a slower disinflation path, making it more cautious in delivering rate cuts.

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6. External Risks and Global Conditions

Short-Term:
The Canadian economy is vulnerable to developments in the US, its largest trading partner. The Trump administration’s reciprocal tariffs, particularly if extended to autos or energy, could directly impact Canada’s export engine.

Medium-Term:
A Canada-US trade war remains a significant tail risk. Market participants are watching whether levies stay in place long enough to impact growth. Canada's ability to diversify exports, maintain investor confidence, and manage political stability will be critical to navigating the next 6–12 months.

Conclusion
The Canadian economy sits at a crossroads. While domestic fundamentals remain reasonably stable, persistent inflation, trade risk, and election-related uncertainty complicate the outlook. The BoC is adopting a cautious stance, watching inflation, the labour market, and external shocks closely. Fiscal policy may become a bigger driver of macro conditions heading into mid-2025.

CHF Macro Breakdown

1. Swiss National Bank (SNB) Policy Outlook

Short-Term (0–3M):
The SNB surprised markets by cutting its policy rate to 0.25% in March, citing continued disinflation and limited upside risk. The central bank is increasingly focused on preserving competitiveness and preventing excessive CHF strength, especially in real terms.

Medium-Term (3–12M):
With inflation expectations anchored and policy rates now well below peers, the SNB is unlikely to ease further unless inflation undershoots significantly. It has shown a preference for using interest rate tools over FX intervention in the current cycle. The SNB is now positioning CHF as a funding currency, which structurally shifts its role in global capital flows.

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2. Inflation and Price Stability

Short-Term:
Swiss inflation remains well below that of most G10 economies. Core measures are softening, and headline CPI is drifting toward zero, driven by weaker imported goods prices and declining service-sector pressures.

Medium-Term:
Switzerland continues to benefit from lower structural inflation due to high productivity, fiscal restraint, and relatively muted wage growth. Barring a renewed global commodity shock, inflation is likely to remain subdued, supporting the SNB’s dovish stance into 2026.

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3. Growth and Domestic Demand

Short-Term:
The domestic economy is underperforming relative to potential. Business activity is soft, with muted momentum in construction and manufacturing. Private consumption remains stable but lacks the dynamism seen in larger European economies.

Medium-Term:
Growth is expected to remain modest, supported by exports and a recovery in capital expenditure. However, global uncertainty and strong deflationary forces could weigh on sentiment and investment, keeping output below potential for some time.

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4. External Sector and Trade Balance

Short-Term:
Switzerland maintains a robust current account surplus, supported by high-value exports (pharmaceuticals, precision instruments) and strong services income. The strength of the CHF in real effective terms has narrowed margins but not reversed the trade surplus.

Medium-Term:
Switzerland’s exports remain well-positioned globally, and its insulation from tariff regimes (due to bilateral trade deals and neutrality) limits external vulnerabilities. However, global demand softness, especially in Europe and China, may cap export growth through 2025.

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5. Fiscal and Structural Policy

Short-Term:
Switzerland maintains a conservative fiscal stance, with low public debt and adherence to its debt brake framework. The federal government is unlikely to deliver significant fiscal stimulus unless external shocks intensify.

Medium-Term:
Stable public finances and institutional credibility continue to support long-term macroeconomic stability. Any increase in spending will likely be targeted and modest, leaving most of the demand-side adjustment to monetary policy and global conditions.

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6. Global Risks and Capital Flows

Short-Term:
The SNB is closely monitoring external developments, including US tariff escalation and European political risk. CHF remains a safe-haven currency, and in times of global stress, inflows tend to strengthen the franc, complicating SNB policy efforts.

Medium-Term:
With the return of near-zero interest rates and limited inflation pressure, the CHF is increasingly used as a funding currency in cross-border carry trades. This structural shift could dampen safe-haven flows over time, but global risk events remain the key wild card.

Conclusion
The Swiss economy is in a low-inflation, low-growth environment with strong external balances and a conservative fiscal framework. The SNB’s recent rate cut marks a strategic pivot toward maintaining competitiveness and managing real CHF strength. Absent a major global downturn, further easing is unlikely. The medium-term outlook remains stable, though highly sensitive to global macro conditions and capital flow dynamics.

EUR Macro Breakdown

1. European Central Bank (ECB) Policy Outlook

Short-Term (0–3M):
The ECB remains cautious, maintaining a data-dependent stance. While the market expects a first rate cut as early as June, recent ECB commentary has emphasized that the bank is in no rush to ease without clearer evidence of disinflation and economic slack.

The ECB is closely watching wage pressures, inflation expectations, and the extent of the transmission of past rate hikes. Fiscal developments, including Germany's spending package and broader EU-level stimulus plans, are also being monitored for their impact on the medium-term inflation path.

Medium-Term (3–12M):
The ECB may begin to ease policy in H2 2025, but the pace and depth of the easing cycle will depend on how quickly core inflation moderates. If fiscal expansion across key member states delivers growth without generating persistent inflation, the ECB could maintain a more neutral stance. That said, the central bank is unlikely to cut deeply unless recession risks rise significantly or inflation undershoots the target materially.

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2. Inflation and Price Dynamics

Short-Term:
Inflation has eased from its 2022–2023 highs, but core inflation remains sticky, especially in services. Input costs are normalizing, but the ECB is still cautious about declaring victory.

Inflation expectations remain well-anchored, but the risk of second-round effects from high wages and energy pass-through lingers, particularly in Germany, France, and Spain.

Medium-Term:
Fiscal stimulus, especially on infrastructure and defense, may contribute to mild upside risks to inflation if supply constraints persist. However, if structural reforms lead to productivity gains and labor market slack increases, the medium-term path could remain in line with the ECB’s 2% target.

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3. Growth and Fiscal Dynamics

Short-Term:
The euro area economy is showing tentative signs of stabilization, but the growth impulse remains weak. Business sentiment and manufacturing PMIs have improved slightly, but hard data remains mixed.

Germany’s approved EUR 500bn infrastructure and defense package marks a turning point in EU fiscal stance, potentially boosting confidence and investment, even if actual spending is backloaded.

Medium-Term:
If fiscal programs are implemented efficiently, they could raise the region’s potential growth rate, especially through investment in digital, energy, and transportation infrastructure. However, execution risk remains high, and a US-EU trade war would weigh on exports and overall economic momentum.

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4. Labour Market and Wages

Short-Term:
Unemployment remains low across the eurozone, with labor shortages in several economies. Wage growth has picked up, especially in services, contributing to sticky inflation dynamics.

Medium-Term:
While tight labor markets persist, broader economic slack could emerge if output remains below potential. Productivity gains from digitalization and fiscal investment will be key in determining how wage increases translate into inflation.

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5. External Trade and Global Exposure

Short-Term:
The eurozone runs a structural trade surplus, but this has narrowed due to energy price volatility and weak global demand. Exports are at risk from rising US protectionism, especially if reciprocal tariffs are imposed targeting European goods.

Medium-Term:
The EU’s external outlook is vulnerable to fragmentation in global trade. Structural headwinds from geopolitical tensions, a potential US-EU trade conflict, and China’s slower recovery could limit external demand. Conversely, any de-escalation of trade frictions or resolution in Ukraine would provide a positive supply-side shock through improved terms of trade and reduced uncertainty.

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6. Political and Structural Factors

Short-Term:
Fiscal momentum is rising across Europe, with looser rules under the revised Stability and Growth Pact. However, political fragmentation, especially in France, Germany, and Italy, may limit coordinated fiscal action or delay reform execution.

Medium-Term:
EU-wide investment in defense, green energy, and industrial policy is likely to continue gaining traction. Over time, this could lead to higher potential output and reduce the region’s reliance on external demand. However, sovereign risk differentials and national-level policy divergence remain structural constraints.

Conclusion
The eurozone is transitioning from post-pandemic stagnation to a period of potential structural renewal, driven by fiscal expansion and supply-side investment. The ECB remains cautious, balancing disinflation progress with sticky wage growth and external uncertainty. While fundamentals are improving, trade risks and execution delays on fiscal stimulus keep the outlook delicately balanced through 2025.

Oil Macro Breakdown

1. Supply Dynamics

Short-Term (0–3M):
The global oil market is tightening following fresh US sanctions on Iranian exports, including measures against Chinese refiners and shipping companies. These restrictions target approximately 1.4 million barrels per day of Iranian crude, increasing the risk of supply disruption in an already constrained market.

OPEC+ remains committed to its output cut strategy, with an updated schedule extending through mid-2026. While monthly adjustments range between 189k and 435k barrels per day, adherence to quotas varies significantly across member states. Compliance remains a wildcard in the near term.

Medium-Term (3–12M):
Geopolitical risks, including tensions in the Middle East and potential supply disruptions from sanctioned producers (Iran, Venezuela, Russia), will continue to dominate the supply narrative. Additionally, if US shale fails to scale output efficiently due to capital discipline, global spare capacity may remain limited through 2025.

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2. Demand Fundamentals

Short-Term:
Oil demand is improving modestly, supported by seasonal factors and signs of a cyclical rebound in Chinese industrial activity. India is also posting strong import growth, largely driven by its expanding manufacturing base and rising mobility trends.

However, global demand remains vulnerable to trade policy shocks, particularly from the US. The threat of widespread reciprocal tariffs in early April could weigh on consumption by dampening trade volumes and increasing inflation in importing economies.

Medium-Term:
The demand outlook will depend on the resilience of global growth, especially in Asia. If fiscal expansion in Europe and improving confidence in China persist, oil demand could continue to rise in H2 2025. On the other hand, any slowdown in US consumption or renewed COVID-linked restrictions in Asia could cap gains.

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3. Inventories and Market Balance

Short-Term:
Global inventories have been trending lower, especially in the US and OECD economies. Commercial stockpiles are running below 5-year averages, reflecting sustained draws and tight physical markets.

US natural gas storage has also surprised to the upside, which may alleviate substitution demand for oil in power generation. However, structural tightness remains in the crude complex due to underinvestment in upstream projects over the past five years.

Medium-Term:
Inventory normalization is expected to continue, especially if OPEC+ maintains production discipline and sanctions bite deeper into marginal barrels. If global demand outpaces expectations, particularly in non-OECD economies, the market could tighten further, reducing buffer capacity heading into 2026.

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4. Structural Themes

Short-Term:
Sanctions enforcement, shipping bottlenecks, and strategic reserve releases have returned as near-term market drivers. The shift in US policy back toward unilateral enforcement increases volatility and reduces clarity around sanctioned flows.

Medium-Term:
Structural underinvestment in long-cycle oil projects, ESG pressures, and regulatory shifts in key producing nations could constrain supply elasticity. Meanwhile, sustained global energy transition policies may begin to affect long-term demand forecasts, although near-term substitution remains limited.

Conclusion
Oil fundamentals are tightening in the short term due to sanctions, steady demand recovery, and restrained supply growth. The market remains vulnerable to geopolitical and policy-driven shocks, especially around trade and US foreign policy. Into the second half of 2025, the global balance will hinge on OPEC+ discipline, China's demand trajectory, and the broader macroeconomic landscape.

Natural Gas Macro Breakdown

1. Supply Dynamics

Short-Term (0–3M):
US natural gas production remains strong, but oversupply conditions have re-emerged. Recent Energy Information Administration (EIA) data shows a 9 billion cubic feet (bcf) weekly inventory build—well above expectations. This reflects mild weather, weaker power burn, and stable output levels.

Despite the seasonal end to winter heating demand, production from key basins such as the Permian and Appalachia remains high. However, falling rig counts and weaker near-term demand may lead to a slowdown in drilling activity in the coming months.

Medium-Term (3–12M):
Producers are expected to gradually curtail output growth, especially if storage builds remain elevated and export demand underperforms. However, new LNG terminals coming online in late 2025 could lift demand and absorb some excess supply, especially in the Gulf Coast region.

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2. Demand Fundamentals

Short-Term:
Domestic demand for natural gas has been softer than expected, driven by milder winter temperatures and rising renewable energy penetration in power generation. Industrial demand remains subdued due to slow manufacturing activity, particularly in energy-intensive sectors.

Export demand through LNG remains a critical support, though it has plateaued in recent weeks. European and Asian buyers remain cautious amid high inventories and diversified supply sources, especially following the 2022–2023 energy crisis.

Medium-Term:
Structural LNG demand from Asia is expected to increase into 2025, particularly from China, South Korea, and Southeast Asia, where long-term contracts are being secured. However, European demand may remain flat or decline modestly as countries push further into energy efficiency and green transition policies.

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3. Storage and Market Balance

Short-Term:
US storage levels stand at 1.71 trillion cubic feet (tcf)—about 27% higher year-on-year and 10% above the five-year average. This high storage cushion limits upside for supply-side tightening and has capped near-term drawdowns.

Injection season is starting from a high base, which reduces urgency for aggressive restocking, especially if industrial demand doesn’t recover quickly.

Medium-Term:
Storage is expected to remain well supplied through the summer, but volatility may rise if there are disruptions to US LNG exports or if heatwaves lead to unexpected spikes in power burn. A hotter-than-normal summer could tighten balances temporarily.

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4. Geopolitical and Regulatory Themes

Short-Term:
The US remains a dominant LNG exporter, but regulatory delays on new infrastructure approvals have surfaced as a near-term risk. Environmental reviews and political scrutiny over fossil fuel expansion may slow the pace of new projects.

In Europe, geopolitical tensions have eased slightly, and LNG dependency has normalized after a volatile 2022–2023. However, any supply shocks from Norway, the US, or Qatar could quickly reintroduce risk premium into global flows.

Medium-Term:
US LNG capacity is expected to expand meaningfully by late 2025 into 2026, which may re-tighten balances and increase demand for feedgas. Export infrastructure bottlenecks and shipping logistics remain key watchpoints.

Conclusion
Natural gas fundamentals are currently loose, with high US storage, mild weather, and subdued demand keeping the market in surplus. The medium-term outlook improves with the anticipated rise in LNG export capacity and renewed Asian demand, but structural headwinds from decarbonization and renewable adoption will remain. Any supply disruption or extreme weather could shift the balance quickly, but for now, conditions point to abundant supply and moderate demand recovery through 2025.

Gold Macro Breakdown

1. Monetary Policy & Real Yields

Short-Term (0–3M):
Gold continues to be driven primarily by real interest rate expectations. The Federal Reserve’s signal that it is willing to look through short-term tariff-induced inflation and still cut rates in 2025 has reinforced a supportive environment for gold. Real yields have drifted lower as a result, improving the opportunity cost dynamics in favor of the metal.

Other major central banks such as the ECB and BoE are also moving cautiously toward easing, which adds to the broad-based decline in global real yields, reinforcing support for non-yielding assets like gold.

Medium-Term (3–12M):
If disinflation trends continue globally and rate cuts proceed as expected, gold is likely to benefit from a sustained period of negative-to-flat real yield pressure. Conversely, any hawkish policy pivots due to sticky inflation could create headwinds. Central bank policies remain the key macro anchor for the medium-term gold narrative.

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2. Geopolitical and Systemic Risk

Short-Term:
Persistent global uncertainties—ranging from escalating trade tensions to conflict risks in Eastern Europe and the Middle East—are supporting precautionary demand for gold. The upcoming implementation of US reciprocal tariffs and rising global political instability ahead of major elections are reinforcing gold’s appeal as a geopolitical hedge.

Medium-Term:
Gold continues to serve as a hedge against monetary policy error, systemic financial stress, and geopolitical escalations. If trade wars broaden or capital market volatility returns due to risk-off events, demand from both institutional and retail investors is likely to remain elevated.

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3. Central Bank Demand

Short-Term:
Central banks, particularly in emerging markets, have remained net buyers of gold, with continued diversification away from USD reserves. Countries facing reserve pressure or seeking strategic hedges—such as China, Turkey, and India—have supported physical gold demand.

Medium-Term:
Sovereign demand is expected to remain structurally strong, especially as countries aim to de-dollarize portions of their reserve portfolios. Central banks are expected to continue accumulating gold as a strategic asset, providing a steady demand base even as speculative flows vary.

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4. Investment and ETF Flows

Short-Term:
Investment demand has remained mixed. Physical bar and coin demand is strong in Asia and the Middle East, while ETF flows in Western markets have shown periods of both inflows and redemptions depending on real rate movements and macro data releases.

Medium-Term:
As rate cuts begin and real yields trend lower, gold ETF demand is expected to return, especially if market volatility increases. Institutional positioning may shift in gold’s favor if equity markets correct or if risk-adjusted returns across fixed income compress.

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5. Currency and Liquidity Factors

Short-Term:
The outlook for the US dollar is a key variable. A pause or reversal in USD strength, especially if driven by slower growth or widening fiscal deficits, would support gold demand from non-USD holders. Liquidity conditions also remain supportive, with global central banks slowly loosening financial conditions.

Medium-Term:
Any broad-based weakening in the dollar—particularly in a lower growth, lower rate environment—would enhance gold’s relative appeal globally. Conversely, a resurgence in USD demand driven by safe-haven flows or Fed divergence could be a headwind.

Conclusion
Gold’s macro outlook is underpinned by an expected decline in real yields, persistent geopolitical uncertainty, and steady central bank accumulation. While demand is sensitive to monetary policy signals and currency dynamics, the current environment of easing policy, trade friction, and global political risk creates a fundamentally supportive backdrop for gold over both short and medium-term horizons.

Silver Macro Breakdown

1. Monetary Policy & Real Yield Sensitivity

Short-Term (0–3M):
Silver, like gold, is heavily influenced by real interest rate expectations, but with higher beta to both monetary policy and industrial growth expectations. The Federal Reserve’s dovish guidance—despite higher near-term inflation projections—has reinforced expectations for rate cuts in 2025, reducing the opportunity cost of holding precious metals.

Other central banks are also turning more accommodative, creating a broad-based softening in global yield curves, which supports silver’s appeal as both a monetary hedge and speculative asset.

Medium-Term (3–12M):
The prospect of declining real rates and softer USD supports silver’s monetary investment case. However, silver is more volatile and will likely require confirmation of a recovery in industrial demand to outperform gold over this horizon.

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2. Industrial Demand Trends

Short-Term:
Silver demand from industrial sectors remains muted but stable, with softness in electronics and solar panel production in early 2025. However, forward-looking indicators suggest improving sentiment in the renewable energy and electric vehicle supply chains, both of which are silver-intensive.

Medium-Term:
Structural drivers tied to the energy transition, including photovoltaic (solar) expansion, 5G infrastructure, and battery manufacturing, are expected to support rising industrial demand. If global manufacturing rebounds, silver’s hybrid role between precious and industrial metals could come into stronger focus, differentiating it from gold.

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3. Investment and ETF Flows

Short-Term:
Investment flows into silver ETFs and physical products have been mixed, following the same macro triggers as gold but with more volatility and sensitivity to equity and risk sentiment. Retail demand remains relatively strong in North America and India, especially for physical bars and coins.

Medium-Term:
With monetary conditions set to ease globally and inflation expected to remain above historical norms in many economies, silver may benefit from renewed institutional interest. If gold strengthens meaningfully on real yield compression, silver could outperform via relative catch-up trade dynamics, especially in risk-on environments.

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4. Supply Dynamics

Short-Term:
Mine supply remains relatively constrained due to low investment in new capacity over the past decade. Recycling volumes have been stable but may rise modestly in response to increased scrap incentives.

Medium-Term:
Supply is unlikely to expand meaningfully through 2025 given capital discipline across producers and elevated energy and environmental compliance costs. Any meaningful increase in industrial demand could lead to a tightening physical market, especially if speculative demand increases concurrently.

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5. Currency and Global Liquidity Factors

Short-Term:
Silver is sensitive to movements in the US dollar, and the current environment of softening dollar strength is mildly supportive. Liquidity conditions globally are turning more accommodative, especially in Asia, which supports physical demand.

Medium-Term:
If the dollar weakens more materially, and liquidity expands through synchronized global easing, silver may benefit more than gold due to its dual exposure to monetary and industrial reflation cycles.

Conclusion
Silver’s macro outlook is improving, supported by easing monetary policy, stable-to-rising industrial demand, and constrained supply. While more volatile than gold and sensitive to shifts in global growth sentiment, silver stands to benefit from both real yield compression and green energy demand expansion. The balance of risks into 2025 favors a constructive medium-term view, provided global macro conditions remain stable and industrial activity picks up.

Platinum Macro Breakdown

1. Industrial Demand and Automotive Sector Exposure

Short-Term (0–3M):
Platinum remains heavily tied to the automotive sector, particularly for use in catalytic converters in diesel vehicles. Demand in this segment is soft due to weak vehicle production in Europe and regulatory pressure on diesel models. However, platinum is beginning to gain market share as a substitute for palladium in gasoline engines, which is helping to stabilize demand.

Medium-Term (3–12M):
Substitution trends are expected to continue, particularly in China and India, where automakers are increasing platinum content to reduce reliance on higher-cost palladium. Additionally, platinum demand is forecast to rise in hydrogen fuel cell development, though this remains a longer-term driver with limited near-term impact.

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2. Investment and Safe-Haven Demand

Short-Term:
Platinum has not benefited as strongly from macro hedging flows as gold or silver, largely due to its lower liquidity and less prominent role in monetary portfolios. ETF flows have remained muted, and institutional demand has been concentrated in industrial hedging strategies rather than outright speculation.

Medium-Term:
Should gold rally on the back of falling real yields and renewed investor risk aversion, platinum may attract secondary flows through reallocation within the precious metals space. However, it remains more dependent on real economy conditions than on monetary trends alone.

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3. Supply Conditions

Short-Term:
Platinum supply is heavily concentrated in South Africa and Russia, both of which face ongoing challenges. South African output has been affected by power shortages and labor disruptions, while Russian material remains constrained due to geopolitical sanctions and export rerouting.

Medium-Term:
Global mine supply is expected to remain constrained through 2025. Capital expenditure on new production remains low, and recycling flows are soft. This could result in physical market tightening if demand accelerates or inventory levels draw down unexpectedly.

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4. Substitution and Technological Shifts

Short-Term:
Automotive OEMs are increasingly shifting toward platinum-for-palladium substitution as part of cost-control measures. This trend is supported by improved fabrication techniques and platinum’s favorable long-term availability relative to palladium.

Medium-Term:
Growing momentum in hydrogen fuel cell adoption could support structural platinum demand, especially in heavy-duty transportation and stationary power generation. While still small in scale, policy support in Europe, Japan, and China may accelerate adoption rates into late 2025 and beyond.

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5. Currency and Macro Environment

Short-Term:
The relative strength of the US dollar and risk appetite in global markets are important secondary factors for platinum, especially via their influence on investor sentiment and ETF flows. Current easing expectations from major central banks are broadly supportive of the overall precious metals complex.

Medium-Term:
Should global monetary policy shift further toward accommodation and industrial activity begin to recover, platinum may benefit from its dual role as both a precious and industrial metal, with upside potential if substitution and green energy themes play out simultaneously.

Conclusion
Platinum’s macro outlook is improving gradually, supported by constrained supply, long-term substitution trends, and potential upside from hydrogen-related technologies. Unlike gold or silver, platinum is primarily an industrial metal and will rely more on automotive recovery, fuel cell adoption, and substitution economics than on real yield compression alone. The medium-term setup is constructive, but closely tied to global manufacturing and industrial sentiment.

Agricultural Commodities Macro Breakdown

1. Grains (Corn, Wheat, Barley)

Short-Term (0–3M):
The global grain market is seeing easing pressure on supply chains. The International Grains Council has raised its production estimates for the 2025/26 season, projecting higher output for corn, wheat, and barley, particularly from Brazil, Argentina, Ukraine, and the US. Weather conditions have remained generally favorable across major growing regions.

Trade disruptions have been minimal, and port logistics in the Black Sea region are operating more steadily. However, geopolitical risks remain in play, particularly in Eastern Europe.

Medium-Term (3–12M):
With higher expected yields and growing inventories, ending stocks for corn and wheat are set to rise modestly. Demand is likely to recover slowly, led by Asia and the Middle East. However, protectionist trade measures or fertilizer shortages could still disrupt this trajectory. Biofuel policy developments in the US and Brazil may also shift corn usage dynamics later in the year.

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2. Oilseeds (Soybeans, Canola, Sunflower)

Short-Term:
Oilseed markets are entering 2025/26 with stronger fundamentals. The IGC forecasts a 2.2% increase in global soybean production and a 4.2% rise in consumption. Brazil and the US are expected to drive most of the output gains.

Canola and sunflower oil markets remain tight in Europe, but easing supply constraints from Ukraine and improved trade flows are stabilizing processing margins.

Medium-Term:
Soybean stocks are expected to rise slightly, helping to stabilize global prices. Demand will be supported by strong Chinese consumption and biodiesel demand, though shifts in renewable fuel policy in the US and EU could alter demand profiles. Continued monitoring of rainfall patterns in South America will be critical heading into Q3 2025.

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3. Soft Commodities (Coffee, Cocoa, Sugar, Cotton)

Coffee
Short-Term:
Coffee supply is stable, with good weather conditions in Brazil and Vietnam. Robusta output is recovering after previous weather-related disruptions. Demand is seasonally soft but expected to improve heading into mid-year.

Medium-Term:
Rising incomes and consumption in Asia and the Middle East are supportive for demand. Inventory levels are comfortable, but currency volatility in major producers could affect farmer profitability and export incentives.

Cocoa
Short-Term:
Cocoa remains one of the most supply-constrained agri-markets due to poor harvest conditions and structural underinvestment in West Africa. Bean quality and delivery disruptions are affecting the supply chain.

Medium-Term:
Chronic underinvestment, aging trees, and disease risks continue to cloud the outlook. Even with high prices incentivizing output, meaningful relief on supply is unlikely before 2026, keeping fundamentals tight.

Sugar
Short-Term:
Global sugar output is recovering on the back of strong harvests in India and Brazil. Ethanol demand remains the swing factor, especially in Brazil, where pricing incentives dictate the sugar-to-ethanol production split.

Medium-Term:
With global supply improving and stocks normalizing, sugar markets are expected to remain balanced. However, energy-linked volatility and climate risks—such as late-season drought or flooding—can quickly reverse the outlook.

Cotton
Short-Term:
Cotton demand remains subdued amid slow global apparel production. Inventories are ample, but production forecasts are being revised lower in some regions due to high input costs.

Medium-Term:
Recovery in textile demand from China and South Asia will be key. Weather volatility in the US and India, combined with shifting trade policies, may affect both acreage and export competitiveness.

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4. Trade, Policy & Climate Risks

Short-Term:
Agricultural trade is relatively stable despite broader geopolitical tensions. However, US reciprocal tariffs and potential retaliatory measures could disrupt flows in soybeans, corn, and processed foods.

Medium-Term:
Climate volatility, fertilizer affordability, and protectionist trade measures remain key macro risks. Global food security initiatives and green policy shifts could structurally reshape the demand mix in favor of more sustainable crops or alter planting incentives.

Conclusion
Agricultural commodity fundamentals are entering a more balanced phase. Improved weather, higher yields, and rising stock levels are stabilizing many grain and oilseed markets. Cocoa remains structurally tight, while soft commodities like coffee and sugar are more balanced. Key watchpoints for 2025 include climate volatility, biofuel policy, and global trade disruption risks from new tariffs or sanctions.

S&P 500 Macro Breakdown

1. Earnings and Corporate Fundamentals

Short-Term (0–3M):
Corporate earnings growth is stabilizing after a soft patch in late 2024. Recent results have shown resilience in large-cap tech, healthcare, and consumer services, while cyclicals and industrials remain under pressure due to higher input costs and slower global demand.

Margins are compressing mildly across sectors, but cost discipline and AI-driven productivity gains are helping large-cap firms offset revenue headwinds. Earnings revisions have turned neutral after several quarters of downgrades, suggesting the bottom in profits may be in.

Medium-Term (3–12M):
Earnings growth is expected to re-accelerate in H2 2025, particularly if the Federal Reserve delivers on its expected rate cuts and consumption stabilizes. However, this recovery is contingent on inflation staying contained and the labor market softening in a gradual, non-recessionary manner.

Sectors with structural tailwinds—such as semiconductors, cloud computing, green infrastructure, and AI platforms—are expected to lead the next leg of growth. However, small and mid-cap earnings may lag without a stronger macro tailwind.

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2. Monetary Policy and Financial Conditions

Short-Term:
The Federal Reserve’s guidance for two rate cuts in 2025 has improved sentiment and helped ease financial conditions, particularly in credit and equity risk premia. Market-based inflation expectations remain anchored, allowing the Fed to maintain a dovish bias despite near-term tariff-related price pressures.

Medium-Term:
If rate cuts proceed as planned and are accompanied by stable inflation expectations, financial conditions should remain broadly accommodative. A key macro support for equities will be declining real interest rates, which reduce the discount rate on future earnings and support higher valuation multiples—particularly in growth sectors.

However, any surprise inflation acceleration, labor market re-tightening, or hawkish Fed pivot would risk reversing the current policy tailwind.

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3. Consumer and Business Demand

Short-Term:
Consumer demand is softening but remains positive. Real income growth has turned slightly negative, and elevated borrowing costs are weighing on discretionary spending. Business investment is holding up, particularly in software and automation, but capital expenditures in traditional industries remain cautious.

Medium-Term:
A potential recovery in real income and job growth later in the year could revive consumer momentum, particularly if inflation slows as expected and fiscal policy remains neutral. Business confidence will also depend on clarity around trade policy, tax outlook, and regulatory direction post-election.

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4. Labor Market and Productivity

Short-Term:
The labor market is cooling gradually, with slower payroll growth and modest upticks in unemployment. Wage growth remains elevated but is showing signs of deceleration. Companies continue to manage headcount carefully, avoiding mass layoffs while limiting hiring.

Medium-Term:
Productivity growth is likely to improve, particularly in tech-heavy sectors, as firms invest in AI, automation, and digital workflows. If wage growth decelerates faster than expected while output remains steady, corporate profitability could improve significantly, particularly in services and high-margin industries.

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5. Policy and Political Risk

Short-Term:
Trade policy remains a key source of uncertainty, with reciprocal US tariffs set to be announced in early April. While the direct earnings impact is expected to be limited for most S&P 500 firms, second-order effects on supply chains, cost structures, and sentiment could be meaningful.

Medium-Term:
The 2025 presidential election introduces policy uncertainty across tax, regulation, and federal spending. Investors are watching for clarity on corporate tax rates, climate-related subsidies, and the future of antitrust enforcement—particularly for big tech and energy names. Political gridlock or volatility could impact business confidence and investment planning.

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6. Global Growth and Exposure

Short-Term:
S&P 500 revenues have roughly 30–40% international exposure, with particular sensitivity to Asia and Europe. A slowing global cycle and high geopolitical tension have capped near-term export momentum, but a stable USD and soft landing in key markets could cushion the downside.

Medium-Term:
If China stabilizes and Europe accelerates post-fiscal stimulus, international revenue contributions could become a positive catalyst, especially for large-cap industrials, tech, and luxury consumer brands. Currency dynamics and supply chain adjustments will also remain in focus.

Conclusion
The macro backdrop for the S&P 500 is transitioning from late-cycle moderation to early-cycle stabilization. Key supports include expected Fed easing, improving earnings visibility, and secular strength in technology and productivity-led sectors. Risks remain from policy uncertainty, consumer softness, and geopolitical volatility, but overall conditions point to a cautiously constructive outlook into late 2025.