The commodity market is at risk of a reversal that will be volatile similar to 2008, according to Bloomberg Intelligence. In this scenario, gold appears to be one of the best options with its ability to surpass $2,000 after markets mark the end of the Fed rate hike cycle.
Mike McGlon: This is a development that could shine on gold
Bloomberg Intelligence senior commodity analyst and well-known for his accurate forecasts Mike McGlone said in his May outlook report that commodities are likely to rise in 2008 this year. He states that it is at increased risk for a similar wild course, and that this is a development that could shine on gold. The analyst, whose successful predictions can be seen in this article of Cryptokoin.com , makes the following assessment:
Commodities have increased by 50% in the last 10 years and the Producer Price Index has increased by 30%. Gains are likely to slide as the world faces a potential recession and the Fed tightens the reins. Rate hikes could coincide with peak inflation. Crude oil, one of the commodities that has made big gains on geopolitical uncertainty and supply concerns, could reverse its gains and drop from around $100 to $50 a barrel.
“Gold may break $2,000 resistance when this time comes”
In this view from Mike McGlone, the gold market looks solid. The precious metal could break the critical psychological level of $2,000 once the markets mark the end of the Fed’s walking cycle. The analyst says:
Between the Federal Reserve’s global GDP drops and a falling stock market, the endgame looks positively biased towards gold. The precious metal could break the $2,000 resistance as Fed funds futures begin to predict the end of a rate hike cycle.
When gold last bottomed in 2015, the move coincided with markets predicting the end of the rate hike cycle. That’s what’s likely to happen in 2022, according to the report. Mike McGlone explains his views with these words:
The precious metals price view seems simple to us. When one-year federal funds futures (FF13) bottoms out, so can gold.
A matter of time above $2,000 gold
Gold’s price floor is currently around $1,800 with key resistance at $2,000 . The senior analyst says it’s only a matter of time before gold trades above this resistance target:
The most important potential catalyst is a trough in Fed rate hike expectations that may not materialize until the stock market drops further. The S&P 500, down about 10% from 2022 to April 28, seems insufficient.
The big unknown in commodities remains grain production. And that uncertainty could well support prices going forward. According to Mike McGlone, grains, the commodities with the highest elasticity of supply, are poised to outperform given the production and yield uncertainties resulting from the Russia-Ukraine war. The analyst explains:
Our analysis shows the former threshold of resistance in corn at around $7 per bushel as initial support. Abundant profits for farmers could mean an increase in production as the Corn Belt fires for a record crop.
