Reaching $2,000 Gold: Stock Market Returns, US Treasury Bond Yields Fall – Bloomberg Intelligence
(Kitco News) Gold is poised to resume its rally, and two key drivers could carry the precious metal above the $2,000 an ounce level, according to Bloomberg Intelligence.
“Down about 7% in 2021 and after retreating almost 20% from record highs, the metal looks ripe to resume its rally,” said Mike McGlone, senior commodities strategist at Bloomberg Commodities.
The two drivers that could trigger a return to August highs are a reversal in the stock market and further declines in US Treasury yields.
“A potential catalyst for gold to break through the $2,000 an ounce resistance is some stock market reversion and the continued decline in US Treasury bond yields from the March high,” McGlone said. . “We see gold more likely to approach the $2,000 resistance than hold below the $1,700 support at 2H. Like bonds, the metal can provide a hedge against increased market volatility. fellows.”
At the time of writing, August Comex gold futures were trading at $1,797.00, down 0.28% on the day, while the US Treasury yield at 10 years fell to 1.3%.
The macro environment remains very accommodative, with gold and bonds working in tandem to provide a hedge against heightened equity market volatility in the second half of the year.
“It’s the near certainty of rising US debt to GDP and growing reliance on quantitative easing that keeps our bullish bias on the price of gold, especially thanks to a good discount by compared to the 2020 peak,” McGlone added. “The yield on long-term US Treasury bonds showing comfort at 2% support is increasingly tilting the odds toward a resumption of more deflationary trends.”
McGlone described gold as the best performing commodity while pointing to oil as the big loser in the second half.
“We see a bull market in gold that has been supported on good support on short-term issues, but with longer-term, sustainable underpinnings. be in a longer bear market,” he said. . “Crude oil may follow spikes in lumber, corn and copper.”
The report noted that gold would outperform crude, citing supply and demand fundamentals.
“Gold has strong fundamentals thanks to its limited supply and store of value, its status as a diversifier in the race to depreciate countries’ fiat currencies with rising debt-to-GDP and levels of quantitative easing,” McGlone wrote on Wednesday. “Juxtaposed is the world’s most important commodity – crude oil – facing additional declining demand relative to growing supply as technology rapidly advances and demographics change.”
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