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Gold is in a discounted bull market - Bloomberg Intelligence

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(Kitco News) - The gold market still has a path to $2,000 in the second half of the year as the precious metal is undervalued in a world awash with liquidity, according to the latest research from Bloomberg Intelligence (BI).

In a report published Wednesday, Mike McGlone, senior commodity strategist at BI, said that within the metals complex, gold appears to have the most potential when compared to other assets like copper and aluminum.

"Copper and aluminum are reaching upper range price caps, but we see gold as a discounted bull market with improving fundamental underpinnings," he said in the report. "The copper-to-gold ratio has reached the highest level in about seven years and a rare disparity vs. declining U.S. Treasury bond yields, which we expect will be resolved by a resumption of the precious metal outperforming the industrial.

Looking at aluminum, McGlone said that tightening supply and demand fundamentals are helping to push prices to $3,000 per tonne; however, similar to copper's run to $10,000, he added that aluminum’s rally appears to be unstable. He said that the industrial metal complex faces some challenging near-term hurdles.

"Supply elasticity is proving strong for copper, indicating headwinds for the industrial-metal sector, but ESG, electrification and decarbonization trends should maintain the group's upper hand vs. most other commodities, with the exception of precious metals," he said. "Among the most supply-constrained commodities, gold and silver have the relative advantage heading toward the end of 2021 of having experienced sharp corrections within more enduring bull markets, as we see it."

While there is plenty of bullish sentiment surging through precious metals markets, gold prices continue to struggle to find consistent momentum. The precious metal is holding support above $1,800 an ounce, but it has been unable to push above $1,820 an ounce. December gold futures last traded at $1,810.80 an ounce, down 0.29% on the day.

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