Strategist: US stocks falling back or gold price catalyst to see $4,000 by year-end

Gold prices began the week under heavy selling pressure, but one market strategist still sees a clear path to $4,000 an ounce before the end of the year.

Gold futures fell more than 2 per cent in December and spot prices fell 1.4 per cent on Monday as investors waited for clarity on possible tariffs on imports of 100oz and 1kg of gold bars.

Strategist: US stocks falling back or gold price catalyst, seeing $4,000 before the end of the year (Figure 1)

Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said that despite the recent volatility in gold prices, overall, gold prices will continue to hold the key support level above $3,300, and its technical price movement may indicate that gold prices will soon break through.

He added that the key to gold's breakout could lie in equities, with the S & P 500 Index looking a bit heavy near its recent all-time highs above 6,400.

"The key catalyst for the next step towards $4,000 could come from some support from US equities, which could also highlight the risks for gold," he said in his latest report. "Gold has been firmly anchored at around $3,300 an ounce since April and it may take an unexpected force to push it below that threshold. ETFs have turned decisively to inflows after four years of outflows.A slight pullback in U.S. stocks could be the catalyst for pushing gold prices closer to $4,000.”

McGlone pointed out that the performance of the Standard & Poor's index against the MSCI global ex-U.S. index continued to hit record highs. butHe also warned that the price movement is testing the support level of its trend line.

"Human ingenuity and returns are the main reasons why equities outperform gold in the long run, but it is common for long-term bonds to outperform equities," he said. "Gold has kept pace with artificial intelligence-driven equity index total returns since 2017, which is not a good economic signal and could mean that risk assets are overvalued. If the S & P 500 breaks the global trend line before the end of the year, it could trigger a deflationary domino effect."

Although McGlone will closely monitor the stock market to determine the next move in gold prices, he also reiterated that geopolitical uncertainty driven by the United States remains an important trigger for gold prices.AUSFOREX

"President Trump's resistance to US statistics and Fed independence could be good for the gold market," he said.

Strategist: US stocks falling back or gold price catalyst, seeing $4,000 before the end of the year (Figure 2)

Daily chart of spot gold, source: Internet

Beijing time 10:42 spot gold, quoted at $3352.43/ounce

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Disclaimer: The content of this article does not represent the views of the Institute of Foreign Exchange. The content is for reference only and does not constitute investment advice. Investors operate accordingly at their own risk.