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Gold ‘Poised’ To Hit $1,300 - Bloomberg Analyst

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(Kitco News) - The technical setup in the gold market right now is convincing one analyst that $1,300 gold may be just around the corner.

“Gold appears to be biding time for its next leg of the recovery,” noted Mike McGlone, commodities strategist for Bloomberg Intelligence, with one of the report’s sub headers reading: “Gold Setup Favors Shift Into the $1,300 Handle.”

“The biggest risks to the dollar price of gold are likely a recovery in the greenback and the continued absence of financial-market volatility. With the CBOE Volatility Index's 200-day moving average at 11.98, the lowest since its inception in 1990, history dictates that a reversion to greater volatility is a matter of time.”

Gold prices have rallied mid-week as growing tensions between the U.S. and North Korea dominate headlines. But the metal continues to follow the direction of the U.S. dollar. December Comex gold futures settled the day more than 1% higher at $1,278.30 an ounce. At the same time, the U.S. dollar index traded around at 93.50, relatively flat on the day.

Aside from the U.S. dollar, McGlone said he is really tracking inflation and volatility, both forces working in gold’s favor at the moment.

“Gold should benefit when volatility increases, but bonds may not, similar to the deflationary global crisis of 2008. Copper and gold rallying together with a plunging dollar indicates inflation. Volatility, inflation or both are gold-positive,” he wrote.

And, if inflation remains subdued, the Federal Reserve may hold back on aggressively hiking rates – another positive for gold.

“An increase in expected rate hikes is unlikely without inflation pressure, while greater volatility could be a prime driver of a decline -- both strong gold companions,” he said.

The Fed’s planned rate hikes have put pressure on gold since the central bank started tightening in 2015 but thanks to lagging inflation, the Fed might delay its plans.

“The Fed mode appears to be wait-and-see for inflation,” McGlone said.

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