EDITOR NOTE: Gold is two months into its pullback recovery from its August 2020 high. As analysts have begun recommending a shift toward commodities, we have to take a look at how gold is performing relative to other commodity assets. Year to date, gold and silver are at a steep discount relative to just about every commodity class including agriculture, base metals, silver, and especially crude oil, whose performance of 47% currently soars far above the yellow and white metals. Yet, gold and silver form the basis of monetary security in a world that’s about to be engulfed in an inflationary firestorm. With both monetary metals at a steep discount yet on an upward curve, their prices tell us that investors are just now taking action on the likelihood that the Fed may be both overconfident and dead wrong about inflation’s duration--that it’s not the tame, transitory, and easily-controllable phenomenon the central bank thinks it is. In short, now’s the time to purchase non-CUSIP silver and gold if you care about getting in at a steep discount relative to the near future.
(Kitco News) Gold is re-starting its bull rally, with the precious metal currently trading at a "steep discount" to crude oil, according to Bloomberg Intelligence.
The $2,000 gold price target is currently a resistance level, but it will be breached due to the U.S. employment situation, said Bloomberg Intelligence senior commodity strategist Mike McGlone.
"Gold above $2,000, silver [at] $30 may not wait for June unemployment. Weaker-than-consensus April and May U.S. unemployment reports support our key takeaway that gold and silver are ripe to resume their bull markets," McGlone said in a note. "Things may never be the same due to more flexible work schedules. About $2,000 is key gold resistance, which we expect to eventually be breached."
From a technical perspective, gold's current price levels are "at an unsustainably steep discount to its more enduring upward trajectory vs. crude oil."
The gold-to-crude ratio will be favoring the precious metal, McGlone pointed out.
"It's the battle between the most significant commodity with low elasticity of supply, gold, vs. a highest, crude oil, and we expect trend resumption favoring the metal. In a world of rapidly advancing technology and seemingly unlimited fiscal and monetary stimulus attempting to offset deflationary forces, the ratio of the price of gold vs. Brent crude oil appears as a discount that has limited further downside," he described.
Gold is also likely to maintain its level above $1,900 an ounce if Brent crude falls back below $70.
A major shift this spring had freed up gold's ability to move higher as the two major obstacles — higher U.S. Treasury yields and bitcoin — have retreated.
"The worst of the gold correction appears over, and we see technical and fundamental drivers pointing to a resumption of the bull market. Strong headwinds from parabolic Bitcoin and rising bond yields appear to have run their course," McGlone noted.
Gold is in a similar set-up as it was in 2018 when it was trading at $1,200 an ounce, and the U.S. 10-year Treasuries peaked at around 3%.
"If the 2021 yield high of about 1.75% is in, it's likely that so is the gold bottom. A big difference from the gold low of about three years ago is that the U.S. underemployment rate was near 5% vs. 10% now," McGlone added.
According to the note, silver's set-up also looks very promising, with the precious metal ready to follow gold and copper to new highs.
"Uniquely precious and industrial, the white metal is top among commodities for potential appreciation, on the back of fundamental and technical underpinnings. Trends in electrification, decarbonization and quantitative easing favor the metal at a steep discount from its peak," McGlone said. "Silver's fundamentals are likely to improve in 2021, with demand possibly up more than 10% from 2020, driven by industrial applications in particular. We believe the metal-market deficit could also persist, as further bar and coins investment and jewelry purchases, especially in the Americas, add to global consumption."
Original post from Kitco