Gold: On track to breach $1900 mark – Bloomberg Intelligence

In an interview with Kitco News, Bloomberg Intelligence Senior Commodity Strategist, Mike McGlone, said the path of least resistance appears to the upside in gold, as the bulls look to breach the $1900 mark.

Key quotes

“Gold is looking at a similar launchpad as in 2008 when prices breached $1,000 and began the rally which led to an all-time high level of just above $1,900.

It was the cut to zero interest rates by the Federal Reserve in December 2008 that accelerated the gold bull market to the 2011 peak. Covid-19 is a worthy catalyst to buoy gold toward its highs. That fact that the metal has reached records in most currencies leads us to expect that a similar result for dollar-denominated gold is only a matter of time.

With base rates at zero or negative, and the Federal Reserve embarking on seemingly unlimited monetary stimulus akin to 2008, we see gold extending its $1,900-an-ounce peak as the next in a stair-step recovery process.”

The quasi-currency price has a strong relationship with Fed rate expectations.

The propensity of governments to indiscriminately flush systems with cash, on the back of Covid-19 demand shocks, promises to add similar buoyancy to debt-to-GDP, along with gold.

Gold is showing divergent strength vs. the dollar, similar to the early days of the bull market at the start of the millennium … Our graphic depicts the upward-sloping 50-week averages for gold and the dollar, akin to 2001-02. When the greenback peaked about two decades ago, it was a launchpad for gold.

The extent of the Covid-19-fueled global recession and corresponding monetary stimulus are firm tailwinds for gold, and obstacles for most other commodities. We see the favorable pre-outbreak conditions in place for precious metals vs. most other assets simply accelerating.”