CGS International
Date of Report: September 10, 2025
Gold Shines as US Recession Looms: Strategic Insights and Market Outlook for Asia Pacific Investors
Market Overview: US Economic Stress Signals Loom Large
The latest Asia Pacific market strategy analysis from CGS International highlights a pivotal moment in the global economic landscape. Recent US job market data nearly confirms a recession, with clear implications for Federal Reserve policy and asset allocation. Against this backdrop, gold and gold miners emerge as standout hedges, even after significant year-to-date (YTD) gains. This comprehensive breakdown unpacks why the US labor market’s cracks may force policy pivots and shift investor positioning, particularly in inflation-sensitive assets.
US Labor Market: Data Points to Recessionary Onset
The US employment report has turned decidedly grim. On a three-month average, total non-farm payroll growth has cratered to just 29,000. Notably, June employment was revised downward into negative territory. Excluding the healthcare sector, the US economy actually shed 142,000 jobs over the past four months—a trend that has historically coincided with the onset of recession.
Key indicators reinforcing the weakness include:
- Temporary hires continue to decline
- Job openings are shrinking
- Confidence surveys are trending negative
This labor market softness is compounded by the Bureau of Labor Statistics’ upcoming benchmark revision (due September 9), which is expected to further lower payroll figures by 50,000 to 75,000 jobs per month for the period April 2024 to March 2025. Such downward revisions often reveal that economic deterioration began well before headline data acknowledged it.
Monetary Policy: Fed Rate Cuts on the Horizon
Labor and inflation are lagging indicators. Rate cuts typically follow, rather than anticipate, economic stress. The Federal Reserve is expected to respond with a 50 basis point cut at the September FOMC meeting, signaling official concern over underlying cracks in the economy.
Ironically, the critique of “Too Late Powell” rings true: the Fed is likely to act only after stress is unmistakable to insiders. However, some optimism remains—fiscal stimulus (“Big Beautiful Bill”), cash tax savings, and a “run the economy hot” approach could provide positive impulse, especially for US companies leveraged to a weaker dollar, AI adoption, and capital spending.
Gold: The Premier Hedge for an Inflationary Pivot
As the Federal Reserve edges towards an inflationary stance, gold stands out as the clear beneficiary. Should policy support require both quantitative easing and rate cuts, gold’s role as an inflation hedge will only intensify.
Despite substantial rallies in 2025, gold and gold miners remain attractively valued. Since the start of August, a basket of gold miners in the recommended sub-portfolio has surged 25%, and an impressive 73% YTD. Yet these miners still trade at just 10 times cash flow—well below the MSCI World Index’s 15.8 times, highlighting sustained demand from emerging market reserve managers and global investors.
| Asset/Class |
YTD Performance |
Since August 1 |
Cash Flow Multiple |
MSCI World Index Cash Flow Multiple |
| Gold Miners (Basket) |
+73% |
+25% |
10x |
15.8x |
Market Valuations: Gold Miners Outperform, Yet Remain Undervalued
What’s remarkable about the current rally is that, despite strong price appreciation, gold miners’ valuations remain inexpensive relative to the broader equity market. This signals that the recent breakout in gold is likely driven by genuine, sustained demand rather than speculative excess.
Sector, Country, and Stock Ratings: Guidance for Investors
CGS International provides a clear framework for interpreting their recommendations:
| Rating |
Definition |
| Add |
Expected total return > 10% over 12 months |
| Hold |
Expected total return between 0% and 10% over 12 months |
| Reduce |
Expected total return < 0% over 12 months |
For sector and country allocations:
- Overweight: Position above benchmark weight
- Neutral: Benchmark-weighted positioning
- Underweight: Position below benchmark weight
| Rating |
% of Coverage |
% Investment Banking Clients |
| Add |
70.6% |
1.1% |
| Hold |
20.5% |
0.5% |
| Reduce |
8.9% |
0.5% |
Coverage for the quarter ended June 30, 2025, spanned 561 companies.
Company Coverage and Analysis
No specific companies are listed by name in the analysis section; instead, the report focuses on gold miners as an asset class, benchmarked against the MSCI World Index. There is no breakdown of individual company analysis or financials in this edition.
Key Takeaways for Investors
- The US labor market is showing clear signs of recessionary stress, with significant downward revisions to job growth expected.
- Rate cuts from the Federal Reserve are highly likely, and may be more reactive than preemptive.
- Gold and gold miners remain compelling hedges, with strong YTD performance and attractive valuations relative to global equities.
- The shift in monetary policy favors inflation-sensitive assets, especially as fiscal and operating leverage factors support select US companies in the near term.
- CGS International’s coverage currently leans heavily towards “Add” recommendations, reflecting a bullish stance on select opportunities.
Disclaimers and Regulatory Notes
This research is intended for institutional and wholesale clients, with distribution subject to various regional regulations. The report includes detailed disclaimers regarding investment suitability, accuracy of information, and potential conflicts of interest.
For further information and specific investment recommendations, investors should consult their professional advisers and consider their own risk profile, objectives, and market context.
