Kitco News: 'Gold Should Head Toward $1,400' - Bloomberg Intelligence

Article by Anna Golubova on Kitco News

Waiting on the greenback to move is the game gold is playing lately, according to Bloomberg Intelligence, which believes that the U.S. dollar will head down soon and trigger a long-awaited rebound in the precious metal.

“Metals will have a hard time recovering if the dollar rally resumes, but we don't see that happening,” BI senior commodity strategist Mike McGlone wrote in the Bloomberg commodity outlook for October. “It's unlikely the dollar can sustain itself above the 14-year high. Risk vs. reward appears to favor metals' longs at current levels.”

The rebound can come fairly quickly, noted McGlone, highlighting the end of the third quarter as a possible timeframe for the move up in the metals.

Bloomberg Intelligence is seeing signs that markets are looking at “an unfavorable greenback end-game,” adding that gold’s current upside potential outweighs its downside risks.

Overall, Bloomberg Intelligence doesn’t rule out a move towards $1,400 for gold in the near future.

“Trading the past few years within the most compressed range in decades increases the chance of a breakout higher, typically the case in such coiled markets. If the greenback resumes the mean-reversion process of 2017, gold should head toward $1,400,” McGlone said.

In order to trigger the gold rally, the metal will not even need a major supportive driver, the analyst added.

“Typically, only a minor spark is needed for reversion to occur. In 1999, expectations of limits on central-bank sales were a prime short-covering spark for gold,” he wrote.

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