Investors are shifting focus from pure artificial intelligence (AI) hype to actual, near-term earnings. High-profile moments—such as Apple raising hardware prices due to surging memory chip costs and reports of Nvidia’s GPU spot prices cooling off—have triggered profit-taking. Wall Street is nervously watching for signs of inflation stickiness. A strong jobs report could prompt a more hawkish Federal Reserve, with some analysts pricing in an interest rate hike as early as September.
If the fear of higher interest rates has hit gold the S&P 500 does not seem to be affected. Yet higher interest rates are bearish for tech stocks, this divergence between gold and the S&P 500 will end. The key is that investors don’t believe interest rates will be considerably higher in the future, they could go up by 25bps or 50bps but upside is limited due to the enormous amount of debt to be serviced. At some point in the future gold and stocks will rally.