Gold is looking ready to jump out of its trading range and the price outlook it tilted to the upside, according to Bloomberg Intelligence’s November commodity outlook.
A historical overview of price trends points to a move up in gold, said Bloomberg Intelligence senior commodity strategist Mike McGlone.
“Gold getting antsy to exit its cage,” writes McGlone. “Gold is poised to exit its narrowing cage soon, with the path of least resistance tilted higher, in our view. Essentially pivoting on $1,500 an ounce since Aug. 7 has resulted in the metal's 40-day Bollinger Bands compressing to the narrowest since June, just before the breakout above $1,300. The bull is getting close to having rested sufficiently to take its next step higher, if history is a guide.”
This could be big news for the metal, which has been trading around the $1,500 level for the past few months. At the time of writing, gold was going through a major selloff with prices down more than 1.5% on the day and December Comex gold futures last trading at $1,484.10.
Gold’s future price direction will closely depend on the U.S. equity market, which was rallying to new record highs on Tuesday.
“Equity corrections have accelerated the process of the primary precious metal advancing vs. the primary industrial. This year's plunge to record lows in the U.S. Treasury 30-year yield and rally in gold vs. copper appear to be a delayed reaction to the late-2018 downdraft in the S&P 500, the index's first 20% correction in seven years,” explained McGlone. “Vulnerability to a stock-market decline has rarely been greater.”
Gold’s overall recovery is just beginning, the strategist added, pointing to technical analysis that predicts a price move higher for gold.
“Early recovery days is our takeaway for the price of gold, gleaned from its volatility. Annual measured volatility (260 days) on the metal bottomed from a two-decade low just a few months ago. Last year, the same S&P 500 metric reached a five-decade nadir. Volatility history doesn't always show robust directional patterns coincident with prices, but it's the shifts in trends, particularly from extreme lows, that can mark turning points,” McGlone said.
Overall, gold will remain one of the most reliable assets out of the whole commodities sector, Bloomberg Intelligence’s monthly update stated.
“Metals are primed to continue outperforming most other commodities. Atop our 2019 leader board, precious metals should be in the early days of breaking from the pack, led by gold,” McGlone wrote. “Gold will maintain the upper hand vs. copper, in our view, with macroeconomic implications. Fed easing and U.S. unemployment the last week of October are unlikely to reverse the trend in rising prices of precious vs. industrial metals. A primary potential accelerant is a wobbly stock market, emphasizing increasing dependency on equities.”