It's Still Contrarian to Be Bearish: 3-Minutes MLIV

Summary

• Mark Cudmore is bearish on gold in the short term, arguing the initial "war premium" is being taken off as profit after the Iran-Israel conflict began this month.
• He cites a major shift in marginal factors: a stronger dollar and higher yields now create a negative environment for gold, reversing previous tailwinds.
• He sees current price action as short-term capitulation but would not be surprised by a further ~10% downside in gold over the coming weeks if the conflict continues.
• The current selloff in gold is partly attributed to a broader "sell the winners" dynamic in markets, as it remains up ~$700 from a year ago, making it a source of profits to cover losses elsewhere.
• He maintains a long-term bullish view on gold as an alternative to fiat currencies, but only expects this narrative to return after the current Middle East conflict is over, contingent on a weaker dollar and softer yields.
• On equities, Cudmore remains structurally bearish, calling the recent selloff the worst month for global stocks in 3.5 years.
• He argues it's still contrarian to be bearish because the market remains positioned optimistically, with a prevailing belief the conflict will end soon.
• He highlights an asymmetric setup favoring further stock market declines, citing high uncertainty around the conflict's duration.