The precious metals sector will continue to beat other commodities as gold prices follow palladium to record highs, according to Bloomberg’s October commodity update.
Gold is looking to accelerate its gains into year-end with the macro environment supporting higher prices, said Bloomberg Intelligence senior commodity strategist Mike McGlone. “Gold will remain at the top of the precious metals leaderboard, and its performance [will] accelerate into year-end. A definitive reversal in weakening global economic conditions should be needed to reverse this trend, yet further woes in 4Q appear the greater risk,” McGlone wrote on Monday.
At the time of writing, December Comex gold futures were trading at $1,507.40, up 1.24% on the day.
The yellow metal is on the path to reverse its 2013 decline from $1,700 and the S&P 500 is a great gauge to use when forecasting the next gold jump.
Bloomberg Intelligence has been tracking the relationship between gold and the S&P 500, noting that every time the index fails to break well above the 3,000 mark, gold gains.
“The price of gold is on a more sustainable upward trajectory, notably if the S&P 500 keeps backing down from 3,000 resistance … [There’s] the potential third month in a row for the equity index to trade above 3,000 -- and at risk of falling short. This level is proving to be an inflection point for higher gold,” McGlone stated. “Divergent strength in the metal may indicate a dimmer future for stocks.”
For the rest of the year, Bloomberg Intelligence is projecting a higher U.S. dollar index and a much lower China GDP — the worst in 20 years.
“We expect global economic malaise will prevail, providing support for precious metals … Dollar-denominated gold should continue to follow the lead of palladium toward record highs, pulling silver and platinum along,” the strategist highlighted.
Another major theme for the fourth quarter is looking to be gold outpacing all other metals, especially copper.
“Up about 3% since the first rate cut of this Fed easing cycle, we expect gold to maintain the upper hand vs. most other commodities,” McGlone said. “The dual trends of declining copper prices and increasing gold should continue … Copper, down about 3% in 2019 on a spot basis, reflects weakening economic conditions and has strong companions in plunging bond yields.”
Courtesy - Kitco