Gold’s rally could signal that markets have fundamentally mispriced the Fed’s next move, predicts the CEO of one of the world’s largest independent financial advisory organisations.
Gold’s first weekly gain in five weeks may ultimately be remembered as the moment investors began unwinding one of the market’s biggest and most crowded theories of 2025: that the Federal Reserve will keep interest rates higher for longer.
The analysis of Nigel Green, CEO of deVere Group, is based around his belief that markets have become overly confident that restrictive monetary policy will remain in place well into next year.
Spot gold rose 1.4% on Friday and was on track for a 2.3% weekly gain after weaker-than-expected US jobs data prompted investors to scale back expectations of further Federal Reserve tightening. According to the latest figures, the US economy added just 57,000 jobs in June, significantly below forecasts and sharply lower than previous months, fuelling fresh questions about the strength of the world’s largest economy.
“I think markets have fundamentally mispriced the Fed’s next move. The consensus view has become dangerously one-dimensional. Investors have spent months pricing for a world of persistently high rates, a strong dollar and continued economic resilience. The risk now is that this entire framework begins to unravel.”
Nigel Green
Gold has suffered heavily this year as investors embraced the ‘higher-for-longer’ narrative.
The precious metal posted its worst quarterly performance in 13 years in the three months to June and remains around 22% below the record highs reached in January.
But the deVere CEO argues that the very severity of gold’s decline has created the conditions for a potentially dramatic reversal. He notes that Gold isn’t rallying because investors suddenly want safety, but because some investors are beginning to suspect that the market’s biggest macro trade of 2025 may have gone too far.
He believes investors are underestimating the speed with which market expectations can shift once confidence in a dominant narrative starts to break.
“When markets become crowded around a single idea, they become vulnerable. We’ve seen that repeatedly throughout financial history.
“The ‘higher-for-longer’ trade has become one of the most crowded macro positions in the world.”
Nigel Green
The deVere CEO says the implications extend far beyond precious metals.
“If economic data continues to soften, investors won’t just be repricing the probability of another rate hike. They’ll start repricing the entire trajectory of monetary policy over the next 12 to 18 months.”
“There’s a legitimate question to be asked about whether markets have been looking in the wrong direction altogether.
“If that proves to be the case, gold’s first weekly gain in over a month will be remembered as an early warning signal that the market’s defining trade was beginning to break.”
Nigel Green
