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Risk in gold is 'limited': Prices still on track towards $2,100 in 2021 - Bloomberg Intelligence

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(Kitco News) Despite a drop below $1,800 an ounce last week, gold's path of least resistance is up, according to Bloomberg Intelligence, which sees the bull run taking the precious metal above $2,000 an ounce in 2021.

"Gold is quite straightforward: probabilities tilt toward more of the same for its price at about $1,790 an ounce on Nov. 27 than advance in 2021 above this year’s peak of around $2,075. A key question regarding gold and risk: what it might take to reverse rising debt and QE?" Bloomberg Intelligence senior commodity strategist Mike McGlone said in his December outlook.

Debt and massive quantitative easing are enough to keep gold's bull run alive next year, noted McGlone, adding that gold has a solid foundation.

"The metal may be less supported by rising stock-market volatility as in 2018-20, but seemingly unstoppable trends in negatively yielding debt, quantitative easing (QE) and rising debt-to-GDP provide firm foundations for the store of value," McGlone said. "The unlikeness of reversing these pre-pandemic trends should limit price pullbacks in the metal."

Bloomberg Intelligence's graphic shows gold's recent drop below $1,800 an ounce as part of the overall uptrend.

"Gold is poised to extend its uptrend in 2021," the December outlook stated. "Dipping into support layers toward the end of November should provide a foundation for further price gains. Backing up into its upward sloping 50-week moving average toward the end of 2020 should provide the gold bull market a relative advantage in 2021."

Gold's is currently in an enduring stair-step rally with the wide range between $1,800 and $2,000 an ounce, added McGlone.

"The metal's upward trajectory, which resumed with the first Federal Reserve rate hike in 2015, shows few signs of other than staying the course. Our graphic depicts gold revisiting good initial support around $1,800 an ounce after an August jump to the most extended above its 50-week mean since 2011," he said. "Sustaining below its 50-week mean of about $1,755 to Nov. 25 would be an initial sign of weakness, but the more likely price trajectory is up."

At the time of writing, December Comex gold futures were trading at $1,779 an ounce, down 0.16% on the day.

It would take something unexpected to knock gold off its bull market run, according to Bloomberg Intelligence.

"Mean, median and mode support in gold comes in just below $1,800 an ounce, and our bias is titled toward this level marking the lower end of the range in 2021. The average spot gold price in 2020 to November is about $1,760, as is the approximate halfway mark of the years' range from $1,452-$2,075. Our graphic shows the annual price of the metal in a clear uptrend," McGlone explained. "About 50% above the five-year mean held resistance in 2020 and comes in near $2,100 for the start of 2021. We see the market more likely to ride this line, like it did from 2001-11, than breach support."

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