Gold Is “Coiled” and Looks Set To Surge Like Natural Gas — Bloomberg Intelligence
Gold Is “Coiled” and Looks Set To Surge Like Natural Gas — Bloomberg Intelligence from GoldCore
– Gold’s “setup” is “similar to natural gas before its big rally”
– Gold is gaining favour over stocks, bitcoin and cryptos
– Metals may be primary beneficiaries of imminent greenback peak
– Silver “appears ready for a potential longer-term recovery”
– GoldCore editors note: Natural gas is 56% higher year to date
by Bloomberg Intelligence (appeared first on the Bloomberg Terminal)
Metals should be primary beneficiaries of an imminent greenback peak, with normalization in U.S. stock-market out performance, Federal Reserve tightening near a finish and the trade-weighted broad dollar approaching multiyear highs.
Though the dollar tops the list of this year’s best performing major assets, gold and copper show divergent strength. Industrial metals appear to be at a discount in a bull market with favorable demand vs. supply conditions.
Indications from precious metals, notably gold, offer a setup that’s similar to natural gas before its big rally.
Bound to historically compressed trading ranges with many typical pressure factors nearing multiyear extremes, precious metals appear close to a maximum loss of faith vs. the strong stock market and greenback.
Gold is low vs. stocks if dollar has peaked
Gold should shine vs. stocks, particularly if the dollar stops advancing. Our graphic illustrates that the gold-to-stocks ratio is potentially bottoming from a good support level despite a resilient greenback. A declining U.S. equity market is a primary force to pressure the dollar, supporting metals. Mean-reversion risks in the trade-weighted broad dollar near the 2002 and 2016 highs may outweigh further appreciation potential.
Reversion in stock prices and Bitcoin toward their means is more than a coincidence, in our view. They’ve rallied together in the past few years with a common support factor — global quantitative easing.
Cryptocurrencies, considered alternatives to fiat currencies such as the dollar, gained plenty of advocates as global central banks rapidly increased money supply to offset deflationary forces.