In February, FOMC minutes revealed internal divergence regarding monetary policy. While most officials maintained a neutral stance, hawkish members advocated for “two-way flexibility,” noting that persistent inflation might necessitate further rate hikes. Concurrently, U.S. Q4 GDP grew by a lower-than-expected 1.4%, slowed by government shutdowns and weakening consumption, though AI-related private investment remained a key pillar of support. Rapid AI advancements sparked market concerns over the disruption of traditional sectors like software development and wealth management. This led investors toward “HALO trades”—prioritizing asset-heavy industries with low obsolescence—to hedge against AI and inflationary risks, driving gains in gold, copper, and mining equities.
Geopolitical tensions escalated on February 28th following joint U.S.-Israeli military strikes against high-ranking Iranian officials. Iran’s subsequent retaliation against Israel and U.S. regional bases—coupled with the blockade of the Strait of Hormuz—disrupted a critical artery for 25% of global oil and gas transport.
The resulting surge in energy prices disproportionately impacted energy-dependent economies like South Korea and Japan, dampening risk appetite and strengthening the USD. While most base metals shifted toward a stagflation outlook, strategic metals like tungsten surged due to defense demand. Despite recent corrections in mining stocks due to rising energy costs, gold is expected to retain its safe-haven appeal as Middle Eastern volatility persists.