(Kitco News) Gold is starting its bullish rally again, with the precious metal currently trading at a “big discount” to crude oil, according to Bloomberg Intelligence.
The $ 2,000 gold price target is currently a resistance level, but it will be breached by the employment situation in the US, said Mike McGlone, senior commodity strategist at Bloomberg Intelligence.
“Gold above $ 2,000, silver [at] June unemployment may not wait for $ 30. Weak-than-consensus US unemployment reports for April and May confirm our key finding that gold and silver are ripe for a resumption of bull markets, “McGlone said in a note. flexible working hours. Around $ 2,000 is a key resistance to gold that we expect will eventually be overcome. ”
Technically speaking, current gold price levels “are at an unacceptably sharp discount to its more stable upward trajectory compared to crude oil.”
McGlone noted that the gold / oil ratio will be in favor of the precious metal.
“This is a battle between the most significant low elasticity of supply commodities, gold, and the highest elasticity crude oil, and we expect the trend to resume in favor of the metal. In a world of fast-paced technology and seemingly unlimited fiscal and monetary incentives, attempts are being made to offset deflationary forces, the gold / Brent oil price ratio looks like a discount to limit further declines, ”he explained.
Gold is also likely to maintain its level above $ 1,900 an ounce if Brent crude falls below $ 70.
A major shift this spring has freed up gold’s ability to move upward as two major hurdles – higher US Treasury yields and Bitcoin – receded.
“The worst of the gold correction seems to be behind us and we see technical and fundamental drivers pointing to a resumption of the bull market. Strong headwinds from parabolic bitcoin and rising bond yields seem to have exhausted themselves, ”McGlone noted.
Gold is in the same position as in 2018, when it traded at $ 1,200 an ounce and 10-year US Treasuries peaked at around 3%.
“If the maximum return in 2021 is around 1.75%, it is likely that this is also a windfall. The big difference from the gold low about three years ago is that the US underemployment rate was about 5% versus 10% now, ”added McGlone.
As per the note, the configuration for silver also looks very promising as the precious metal is poised to follow gold and copper to new highs.
“White metal, with its unique value and industry, ranks first among commodities in terms of potential value growth due to fundamental and technical fundamentals. Electrification, decarbonization and quantitative easing trends favor this metal at a sharp discount from its peak, ”McGlone said. “Silver core performance is likely to improve in 2021, with demand possibly growing more than 10% over 2020, due in part to industrial applications. We believe that the metal market deficit may also persist due to further investment in bullion and coins and the purchase of jewelry, especially in the Americas, increasing global consumption. “
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