Gold is breaking out to new all-time highs. The market’s conventional wisdom is that it is mainly driven by the expectation the Fed will cut rates in June.   The dollar index (dominated by the euro) is still up over 1 percent for the year.  

“We still believe the same underlying premise remains, which is the combination of the expectation that the Fed is still going to cut rates later this year and dollar weakness,” said David Meger, director of metals trading at High Ridge Futures. – Reuters

This makes zero sense to us as the market has priced out two rate cuts for the June meeting since the beginning of the year (see our Yields table).  Moreover, according to the Chicago Fed’s National Financial Conditions Index, liquidity conditions tightened last week (see our Global Commodities table)

Nobody knows for sure, but our best guess is it’s a safe haven play with expected domestic and geopolitical instability to increase as the year progresses.   Stay frosty, folks.