Bloomberg Intelligence is projecting new record high prices in the near future for gold, which should “follow the dollar and equities to new highs.”
“It’s a new year and decade and gold is poised to follow the dollar and equities to new highs.”
Bloomberg Intelligence Senior Commodity Strategist Mike McGlone said the U.S. dollar and stocks obviously can’t go up forever, and even just a normal reversal of the record highs we’ve seen recently could boost gold to new all-time highs.
“It’s a new year and decade and gold is poised to follow the dollar and equities to new highs, in our view,” McGlone wrote in this month’s commodity outlook, per a Kitco report. “When, should be the primary question, particularly when the stock market and greenback succumb to some normal mean reversion. Absent a new higher dollar and stock-price plateau, gold is set to join the all-time-highs club.”
McGlone continued by pointing out the outlook for gold is great because of its strength even in the face of such a strong dollar and record high indexes.
“Gold is the divergent strength standout. Up almost 15% in 2019 despite the 2% gain in the trade-weighted broad dollar indicates the metal is on solid footing for further advancement,” he wrote.
“Gold should remain the stalwart unless equity and dollar strength is sustained. That’s unlikely, particularly as we approach a contentious U.S. presidential election. Divergent strength in the gold price, despite greenback and equity market record highs, indicate anticipation of a more favorable end-game for the quasi-currency.”
So just how high will gold go? According to McGlone, it should soon be in a bull market with prices well above $1,900 an ounce over the next decade. Gold closed out Thursday at $1,476 an ounce.
“Gold recovery began with the first Federal Reserve rate hike in December 2015,” McGlone wrote. “At about the halfway mark of the 2011-15 decline, gold is simply retracing a bear market, for now. A new bull market will come when the dollar-denominated price exceeds $1,900 an ounce. About $1,400 is a good initial support.”
McGlone sees near-term technical direction hitting $1,550 as the major resistance level, with $1,400 as major support.
“Five years of consolidation has formed a solid base for appreciating prices … A peak dollar would be a primary rally catalyst for dollar-denominated gold,” he wrote.
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