(Kitco News) - The gold market continues to consolidate within an elevated range between $3,350 and $3,400 an ounce. According to one analyst, it might be time for investors to look at other undervalued commodities.
In an interview with Kitco News, Jesse Felder, creator of The Felder Report, said that gold’s rally to a record high above $3,500 has already priced in a significant amount of bad news for the global economy, making it difficult to see what new information could spark another move higher in the near term.
“I see gold as an important leading indicator, and today’s higher prices point to a much bigger move in commodities,” he said.
Felder said that he has turned neutral on gold and is now looking at oil as the next major mover in the commodity space. Crude oil has attracted considerable attention in recent weeks due to escalating tensions in the Middle East after Israel launched a barrage of missiles against Iran.
West Texas Intermediate (WTI) crude oil futures have rallied more than 30% over the past month, reaching overnight highs on Monday. However, the market has been unable to maintain its Sunday evening gains, as the chaos in the Middle East has so far remained largely contained within the region.
August WTI futures last traded at $73.32 a barrel, down 2% on the day.
While geopolitical uncertainty could provide some support for oil, Felder said he began watching the energy sector because it remains significantly undervalued compared to gold. He pointed out that the gold/oil ratio is at its highest level since the 2020 COVID-19 pandemic, when oil prices briefly dipped into negative territory.
“This tells me that the opportunity is in oil right now—and in energy stocks,” he said. “Gold has probably run a little bit beyond what is supported by factors like real interest rates and economic fundamentals.”
Felder added that gold’s consolidation is not surprising, noting that the current price action follows a historical pattern. He explained that major breakouts are traditionally followed by years-long periods of sideways trading.
After gold prices peaked in 2011, the market didn’t retest those highs until 2020. Moreover, a sustained break above $2,000 didn’t occur until 2023.
Felder has been bullish on gold and precious metals miners since early 2022.
“There are times to own precious metals and there are times to own energy. Looking at the relative value, right now, energy is the real opportunity,” he said.
Although Felder is more bullish on oil than gold at the moment, he clarified that he isn’t looking to short the yellow metal anytime soon. He said he still holds a core position in gold.
“If we look beyond the short term—over the course of a number of years—gold prices will be significantly higher,” he said. “Over the years, I was significantly overweight gold, and now I have scaled back to a core position. I’m certainly not underweight gold right now.”
