Gold’s potential to outperform base metals in 2024 is gaining traction, according to Mike McGlone, Bloomberg Intelligence‘s Senior Commodity Strategist.
Essentially, the precious metal is showing strength, possibly strengthening its dominance in the coming year amidst feared economic downturns.
On December 15, McGlone posted on X (formerly Twitter) about the shifting dynamics between industrial metals and gold. Notably, he highlighted that weakening base metals contrasted with strengthening gold last year. This divergence could accelerate if “Federal Reserve policies serve as a reliable indicator,” suggested the Commodity Strategist.
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Historically, the ratio of the Bloomberg Industrial Metals Spot Subindex to gold expands with monetary tightening. Conversely, it declines when policies ease. McGlone’s observations draw from this pattern observed since 1991.
Gold to $3,000 per ounce in 2024 and economic domination
In particular, the shared analysis illustrates the current state of the metals market. The ratio of base metals to gold is notably low, barely above the 2020 low point. Despite the Fed hinting at interest rate reductions in March, guidance suggests central bank efforts to stimulate the economy may experience further delays.
A potential global recession looms, with central banks possibly relaxing policies as a remedy. Yet, the efficacy of such actions is uncertain and could come with significant lags. Mike McGlone has consistently warned about that, mentioning Bitcoin (BTC) as a leading indicator.
Interestingly, the Senior Commodity Strategist predicts Gold will reach $3,000 per ounce in 2024 while being bearish about Bitcoin and stocks.
All things considered, McGlone leans towards a cautious interpretation. Despite a resilient US fiscal environment, he posits that the relative underperformance of industrials against gold indicates broader economic challenges. Gold may be poised to shine amid uncertainty, with its ascent suggesting a safe-haven appeal that could eclipse industrial metals in 2024.
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