Emerging markets eye gains as gold rallies and dollar stays strong

Inflation & Commodities - The Fed's concern about inflation primarily stems from the service sector, while goods prices have remained relatively stable since the beginning of the year [2][5] - A weaker dollar has contributed to the rise in commodity prices, but a stronger dollar could potentially lessen the risk of inflation through commodities [3] - Commodity market strength reflects strong US GDP numbers, with the latest data showing a growth handle of 3% plus [5] - Oil prices are easing as tensions in the Middle East decrease, creating a mixed picture for commodities [4][14] Emerging Markets & Dollar Strength - Rising commodity prices generally benefit emerging markets, particularly Brazil, Chile, and South Africa [6][7] - Asian markets, such as India, may be less beneficial from rising commodity prices as they are commodity importers [7] - While the dollar has gained against developed market currencies, emerging market currencies have shown resilience [9] - If the dollar strengthens more broadly, higher beta currencies in Latin America (Mexico, Brazil) and potentially India could be negatively impacted [10] - The dollar index's rise is partly due to weakening in the Euro and Yen [17] Gold Market - Central bank demand, particularly from China and India, is driving the increase in gold prices [12] - Gold is up about 50% year to date [10] Investment Opportunities - China, South Africa, and Mexico are highlighted as potential beneficiaries in Q4 [15][16] - Potential catalysts for China include the APEC meeting and the five-year plan discussion [15][16] - South Africa could benefit from higher gold prices [7][16] - Mexico could benefit from a reduction in trade tensions and progress on the USMCA agreement [16][17]