Gold price “big discount” against crude oil: $ 2,000 of gold will be exceeded – Bloomberg Intelligence

(Kitco News) Gold begins its bullish rally again, with the precious metal currently trading at a “steep discount” to crude oil, according to Bloomberg Intelligence.

The gold price target of $ 2,000 is currently a resistance level, but it will be exceeded due to the employment situation in the United States, said Mike McGlone, senior commodities strategist of Bloomberg Intelligence.

“Gold over $ 2,000, silver [at] $ 30 may not wait for June unemployment. Weaker than consensus unemployment reports in April and May in the US support our conclusion that gold and silver are ripe to resume their bull markets, ”McGlone said in a note. Around $ 2,000 is the key resistance for gold, which we hope to eventually break through. “

From a technical standpoint, current gold price levels are “at an unsustainable discount from its more sustainable upward trajectory relative to crude oil.”

The gold / crude ratio will favor the precious metal, McGlone said.

“This is the battle between the most important commodity with low supply elasticity, gold, versus the highest crude oil, and we expect the trend to pick up in favor of the metal. In a world where technology evolves rapidly and fiscal and monetary stimulus seem limitless attempting to counterbalance deflationary forces, the ratio of the price of gold to Brent crude oil appears to be a haircut that has limited the pursuit. of the decline, ”he described.

Gold should also maintain its level above $ 1,900 an ounce if Brent crude drops below $ 70.

A major change this spring had unleashed gold’s ability to rise as the two main hurdles – higher U.S. Treasury yields and bitcoin – pulled back.

“The worst of the gold correction appears to be over and we are seeing technical and fundamental factors pointing to a bull market recovery. Strong headwinds from parabolic Bitcoin and rising bond yields appear to have run their course,” noted McGlone.

Gold is in a similar configuration to 2018, when it was trading at $ 1,200 an ounce, and 10-year US Treasuries peaked at around 3%.

“If the peak of the 2021 yield of around 1.75% is reached, it is likely that the trough in gold is too. A big difference from the trough in gold of about three years is that the underemployment rate in the United States was close to 5% compared to 10% now, ”McGlone added.

According to the note, the silver pattern also looks very promising, with the precious metal poised to follow both gold and copper to new highs.

“Uniquely precious and industrial, the white metal leads the raw material for potential appreciation, thanks to fundamental and technical foundations. Trends in electrification, decarbonization and quantitative easing favor the metal at a steep discount. relative to its peak, ”McGlone said. “Silver fundamentals should improve in 2021, with demand potentially increasing by more than 10% compared to 2020, driven in particular by industrial applications. in the Americas, add to global consumption. “

Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.

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