Interview, Fireside Chat
Recession watch: How to hedge now
- Gold positioning is expected to shift from the 85th percentile to near the historical median by Thursday, creating a potential entry point for long positions.
- In a base case where the U.S. economy stagnates but avoids recession, gold is projected to rise 10% by year-end to $3,300 per troy ounce.
- Under a recession scenario with a Federal Reserve rate cut of approximately 200 basis points, gold could rally to $4,250 per troy ounce by year-end.
- A $4,250 gold target is also plausible if central bank purchases remain rapid, speculative positioning reaches high levels, and uncertainty stays elevated.
- Brent oil is forecast to decline to $55 per barrel by the end of 2026, assuming the U.S. economy avoids recession by a narrow margin.
- If a global slowdown occurs alongside constant OPEC policy, Brent oil prices could fall to the mid-40s by the end of 2026.
- A full unwind of OPEC voluntary production cuts combined with a global slowdown could drive Brent oil prices to just under $40 per barrel by the end of next year.
- OPECPlus plans to increase production to incentivize better compliance from Kazakhstan and Iraq while slowing the growth of U.S. shale supply.
- U.S. crude oil production is now expected to decline rather than grow following a forecast cut.
- The average break-even price for U.S. producers is projected to be around $50 per barrel in the TTI sense, creating pressure as prices approach this level.
- A strategy using short oil positions as a recession hedge is specifically targeted for 2026 based on a forecast significantly below current levels.
- Oil implied volatility is expected to remain cheap relative to equity market insurance costs, making oil puts attractive for hedging.
- Macro and equity investors are anticipated to buy oil puts to protect against negative growth surprises affecting equity markets.
- High-cost oil producers outside the U.S. are expected to utilize oil puts to hedge against potential additional downside price pressure.
- Tariffs on U.S. copper imports are considered very likely to be announced in the near future, driving regional price differences.
- While a global slowdown may cause copper prices to fall, the long-term bullish outlook is not expected to be derailed, though deficits may be delayed.
- Lower copper prices are expected to support demand while discouraging supply, potentially setting the stage for a tighter market in the future.
- Copper market performance is expected to be more challenging on a cyclically adjusted basis over the coming quarters.