Gold To Benefit as 'Peak Dollar' Looms - Bloomberg Intelligence
(Kitco News) - Gold’s chief rival, the U.S. dollar, is ‘ripe’ to resume its downtrend, says one analyst, who expects commodities to rally in 2018, particularly the yellow metal.
“Caged within narrowing ranges the past few weeks, the dollar and its reciprocal, gold, appear ripe to break out,” noted Mike McGlone, commodities strategist at Bloomberg Intelligence, in a report Monday.
“The path of least resistance is likely the 2017 trend -- dollar down, gold up.”
|Source: Bloomberg Intelligence|
Gold prices have rebounded Monday while the U.S. dollar also continues to climb. The two assets remain range-bound as markets gear up for the Federal Reserve’s December meeting, where investors are pricing in a 91.5% chance the central bank will raise interest rates. December Comex gold futures were last seen up 0.36% at $1,278.80 an ounce while the U.S. dollar index last traded up at 94.55.
The U.S. dollar and gold prices generally trade inversely and because McGlone thinks ‘peak dollar’ is approaching, he expects gold to benefit.
“A potential peak dollar should be a game changer for markets, favoring commoditiesâ€¦ despite the rate-hike
cycle, the best days for the U.S. trade-weighted dollar appear behind,” he wrote.
Another factor to consider are the stock markets, which are trading near all-time highs. If volatility returns, McGlone continued, gold prices should move even higher.
“The 2017 trends in gold (up) and the dollar (down) appear ripe to resume, particularly if some volatility returns to the stock market,” McGlone said. “If buried stock-market volatility finally recovers, Federal Reserve tightening expectations should decline, stimulating gold and the dollar to resume their 2017 trends.”