Bloomberg Intelligence has identified support for gold to ascend to a new all-time high in this final quarter of the year. In its Q4 outlook shared this week, Bloomberg’s senior commodity strategist revealed that it has its eyes firmly fixed on a stronger US dollar, saying that has the potential to give gold a strong burst of momentum in what is likely to be a very topsy-turvy end to an already very turbulent year.
Mike McGlone says historical data supports its expectation for a new gold record, saying, “Gold is likely to remain atop our macro-performance scoreboard in 4Q. The greenback entering a bear market would propel gold, if history is a guide. As a bull market resumes, the metal has pulled back from getting overextended above $2,000 (£1,526) an ounce and should build a base around $1,800 (£1,373), with increasing debt-to-GDP and quantitative easing the catalysts. History dictates that the gold-price rally should accelerate toward $2,000 (£1,526) if the dollar is peaking.
“Our graphic depicts the divergent strength in gold despite a rising dollar. Since the Federal Reserve rate hike in December 2015, gold has gained about 80% vs. 5% in the dollar. In more of a nascent resumption-rally mode at the onset of 2020, the benchmark store-of-value metal appears poised to accelerate its edge vs. most assets if the dollar peaks. In 2008, when gold reached the $1,000 (£762) handle the first time, the trade-weighted broad dollar had dropped to a 13-year low. Record highs in March elevate greenback mean-reversion risks, favouring dollar-denominated gold.”
It’s well worth remembering that the dollar isn’t the sole driving force which signals good news for gold. Other factors, such as the increasingly volatile US election, a struggling stock market and Brexit all favour the yellow metal in its current bull market.
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