Gold ready to join ‘all-time-highs club’ as US dollar and equities can’t go up forever – commodity strategist
With stock prices consistently breaking new records, a normal reversal is bound to happen sooner or later. That could boost gold to a new all-time high, says Bloomberg Intelligence (BI).
New record high prices are in store for the yellow metal in 2020 and in the new decade, according to its senior commodity strategist Mike McGlone.
Writing in the commodity outlook, McGlone said: “Absent a new higher dollar and stock-price plateau, gold is set to join the all-time-highs club.”
The strategist noted that the outlook for gold remains favorable, which is in stark contrast to other commodities, such as oil.“Gold is the divergent strength standout. Up almost 15 percent in 2019 despite the 2 percent gain in the trade-weighted broad dollar indicates the metal is on solid footing for further advancement.”
McGlone went on to say that gold should remain the “stalwart” unless equity and dollar strength is sustained. “That’s unlikely, particularly as we approach a contentious US 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.”
The strategist pointed out that gold recovery began with the first Federal Reserve rate hike in December 2015. “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.”
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Near-term technical direction for gold sees $1,550 as the major resistance level and $1,400 as major support, he added.“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.”
The yellow metal was trading 0.4 percent higher on Thursday at $1,475.70 per ounce.
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