Gold is anticipated to surge to unprecedented heights in 2024, potentially reaching $3,000, driven by worsening macroeconomic conditions, as stated by Bloomberg Intelligence Senior Commodity Strategist, Mike McGlone. In his “Global Commodities 2024 Outlook,” McGlone suggests that gold’s outperformance compared to most commodities and the S&P 500 until November 29 signals a possible reset, characterized by a significant liquidity-driven rise followed by a downturn, potentially the largest in history.
McGlone emphasizes that the recent four-decade highs in inflation could persist, restraining Federal Reserve easing. He envisions gold transitioning from a $2,000 per ounce resistance to a support level, while copper and WTI crude oil may also witness significant increases if Bloomberg Economics’ projection of a US recession in 2024 materializes.
Pointing to gold’s prominence on Bloomberg Intelligence’s macro performance scorecard, contrasting sharply with the Bloomberg Commodity Spot Index at the bottom, McGlone asserts that global markets are heading towards a recession. He raises concerns about falling Treasury bond prices and rising stock-market values, especially in the face of 2024 US recession predictions from Bloomberg Economics and the Conference Board’s leading indicators.
McGlone warns that the impact of central banks’ coordinated rate hikes in 2023 may not fully manifest until the third quarter of 2024. He notes the necessity for the US stock market to remain resilient to avert deflation becoming a dominant theme in the coming year.
Highlighting energy’s position at the bottom of the commodity-sector annual performance scorecard and precious metals at the top, McGlone sees this as a signal of another global recession. He suggests that a potential catalyst for this trend could be a typical US stock-market drawdown. However, he remains optimistic that if Europe and China rebound, and commodity prices stabilize in 2024, the downward trend may be mitigated.
McGlone envisions a ‘great reset’ in 2025, characterized by a lower plateau in risk assets and continued central bank easing. Lower energy prices versus rising gold prices might be a notable trend in 2024, with McGlone citing elasticity forces, Russia’s invasion of Ukraine, and the historical cycle of energy prices as contributing factors.
The strategist emphasizes the evolving relationship between gold and crude oil, suggesting an acceleration in favor of gold in 2024. Rising debt-to-GDP ratios and the US becoming a net crude and liquid fuel exporter contribute to this shift, particularly if the US enters a recession in 2024, as predicted by the Conference Board’s leading indicators. The widening excess of US and Canadian liquid fuel production, coupled with declining demand, may overpower OPEC’s attempts to stabilize crude prices. McGlone concludes by pointing to the rising gold-to-crude ratio since 2008, indicating a tendency for the ratio to spike during recessions.
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