(Kitco News) - Gold prices are under heavy selling pressure to start the week, but one market strategist still sees a clear path for the metal to hit $4,000 an ounce by year-end.
On Monday, December gold futures fell more than 2%, while spot prices dropped 1.4%, as investors awaited clarity on potential tariffs for imported 100-ounce and one-kilogram gold bars. December gold last traded at $3,409.70 an ounce, and spot gold last traded at $3,344 an ounce.
New York-based gold futures saw their premium over London’s Over-The-Counter market explode last week over fears that imported 100-ounce and one-kilogram bars would be tariffed; however, that premium has narrowed Monday as the White House is expected to issue a clarification on its trade policy that would maintain gold’s exemption from import taxes.
Despite the recent volatility, Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, said that looking at the bigger picture, gold continues to hold critical support above $3,300 and its technical price action could signal a breakout soon.
He added that the key to gold’s breakout could be equity markets, as the S&P 500 is looking a little heavy as it trades near its recent all-time highs above 6,400 points
“A key catalyst for a next step toward $4,000 could come from a bit of backup in US stocks, which may also highlight bullion's risks,” he said in his latest note. “Gold's foundation has been solidifying around $3,300 an ounce since April, and it may take an unexpected force to push it below this threshold. ETFs have shifted decisively to inflows after four years of outflows. A slight retreat in US stocks could be a catalyst to nudge gold toward $4,000.”
McGlone noted that the S&P’s performance against the MSCI World Ex-US Index continues to push to record highs; however, he also warned that the price action is testing support at its trend line.
“Human ingenuity and earnings are top reasons the stock market outperforms gold over time, but extended periods when the rock beats stocks are common,” he said. “Gold has kept pace with the AI-driven stock index total return since 2017. It's not a good economic sign and could suggest excessive risk-asset valuations. Or is record-setting gold just a feint? Our bias is the former, and a breach of the SPX vs. world trend line by year-end could trigger deflationary dominoes.”
While McGlone will be watching equity markets closely to signal gold’s next move, he also reiterated that U.S.-driven geopolitical uncertainty also remains an important trigger for gold.
“[President Donald Trump’s] pushback on US statistical data and Federal Reserve independence could be a boon to the gold market,” he said.
