Could the year-end scenario be gold at $2,500 and crude oil at $50? According to Bloomberg Intelligence, gold is one of the assets that could benefit the most this year as oil faces the prospect of crippling demand in the future. Shares of Bloomberg analyst Mike McGlone, known for his accurate predictions cryptocoin.com We have prepared for our readers.
Potential endgame for 2022, according to analyst: $2,500 in gold
Bloomberg Intelligence senior commodity strategist Mike McGlone, who previously accurately predicted the $10,000, $12,000, and $50,000 levels in Bitcoin, makes the following predictions for gold, oil and Bitcoin:
Markets may be facing a prolonged hedging turnaround that we deem necessary to mitigate inflationary pressures. Gold remains the primary beneficiary, potentially along with US Treasuries and Bitcoin. Gold is poised to surpass the $2,000 Rubicon. Potential endgame for 2022: $50 crude oil, $2,500 gold and recession.
The analyst states that gold is trading in a narrowing wedge pattern and points out that these have a habit of breaking upwards. Mike McGlone points to the following levels from a technical standpoint:
The 2021 range, at around $1,700-1,950, roughly matches the 50-week Bollinger bands, which are the narrowest since 2018. We see parallels with the model, which set a base of around $1,200 about four years ago and then surged to over $1,400. 2019 is when the Fed starts easing again. Around $1,800 is a strengthening base for a breakout of the potential $2,000 resistance.
“Gold is the leading potential endgame player of 2022”
According to the analyst, high inflation, rising commodities, a sense of risk aversion in US stocks are currently contributing to the state of gold. The analyst explains the issue as follows:
We see the precious metal as the leading potential endgame player of 2022, especially as commodities priced for supply shocks succumb to inevitable demand destruction. We are witnessing that gold, together with Bitcoin, gains a demand to store value from portfolio managers who are looking for alternatives for recession risks and overdue returns in stocks.
The senior commodity strategist notes that gold’s sticky $2,000 resistance level will likely be a ‘permanent support’ level. Expressing that this will be a great development for the precious metal, which has seen this level as a strong resistance for the last two years, Mike McGlone makes the following assessment:
We believe gold is more likely to dominate over the longer term as a significant headwind could reverse the seemingly unstoppable rise in the US stock market. The S&P 500 may be starting a similar return to average as it did in 2008, but in a much longer way. In 2007, the stock index peaked about 24% above its 200-week moving average. The November high was about 45% above this average.
Mike McGlone: This year could end like 2008
However, the situation looks drastically different for currently rising crude oil prices, with Bloomberg Intelligence not ruling out a sharp drop to $50. The analyst says:
This year could end like 2008 and spark a persistent bull market for gold versus a bear market for crude oil. What is different from 14 years ago is that the war in Ukraine will accelerate the process of technology replacing fossil fuels and the expanded stock market is facing Federal Reserve restriction. Recession is the most important component in the fight against inflation.
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