Veteran strategist says grab your hammer and pick - gold is headed to $3,000

By Barbara Kollmeyer

Critical information for the U.S. trading day

Gold has been 2024's dark horse asset, logging record after record since early March and a roughtly 11% gain for investors in 2024.

The run for the commodity (GC00) has caused some head-scratching. As a rule of thumb, falling interest rates make gold more attractive to hold as it's a nonyielding asset, and hopes for easing this year are high.

Some, like Commerzbank, caution that increasing uncertainty over Fed cuts will be a headwind for the metal. "We doubt that the Fed will embark on a pronounced easing cycle and therefore see limited further upside potential for gold in the medium term," Commerzbank analyst Thu Lan Nguyen told clients on Wednesday.

But move over doubters, because our call of the day from the founder and president of Rosenberg Research, David Rosenberg, sees gold headed to $3,000 or even higher, and not just driven by the Fed.

"With an easing cycle on the horizon, global growth weak and looking weaker, and inflation on its last leg of decline, we're of the view that the tailwinds blowing gold to new highs are about to get a lot stronger," said Rosenberg, in a note to clients.

He points to increased demand by global central banks fretting about China's yuan and an overreliance on the dollar, and strong appetite by retail gold markets, such as a booming India.

And western investors have yet to turn bullish, pulling money out of gold exchange-traded funds. Others have also noted how big money managers are underinvested in the commodity sector overall. Tight supply conditions and gold's haven reputation are also positives, said Rosenberg.

The veteran strategist offers up a handful of price scenarios. Under the first, a recession-free "soft landing" sends global real interest rates back to their long-run average since 2000, knocking 12% off the dollar and boosting gold by 10%.

In the second, a "typical" bear market sends interest rates back to the 2014-2024 average and the dollar 8% lower, meaning 15% upside for gold around $2,500.

The ultra bullish scenario that would push it to $3,000 or beyond hinges on a few key factors. First and foremost, a further ratcheting up of geopolitical tensions - Taiwan, Middle East, Russian borders, Korea, Venezuela/Guyana, just the "predictable ones," would send investors fleeing for the perceived safety of the commodity, said Rosenberg.

"Deteriorations in financial conditions in addition to the impact of interestrates (such as higher spreads driven by rising corporate defaults) would spur on gold too. Finally, repeated and increasingly dire warningsover the fragile state of the U.S. fiscal position can only support bullion buyers," said Rosenberg.

The technicals are also looking good, according to the research house:

"The conclusion for investors is simple: any well-diversified portfolio should contain gold, and, at present, we'd recommend an aggressive overweight. That will act as a hedge against geopolitical and fiscal risks,offer a safe harbor against a breakdown in the equity bull-run, and give positive exposure to the coming easing cycle and period of dollar weakness. Don't be afraid to go in at current levels," says Rosenberg.

And for those investors who think maybe gold's run has gone far enough? Trader Simon Ree, founder of Tao of Trading options academy school, offers a technical outlook on why gold investors shouldn't bail yet - "Shorting at rocket ships is always pretty risky."

Also read: Oil, gold and the dollar are surging. Here's why that could derail the Fed's rate-cut outlook.

The markets

Stocks SPX DJIA COMPare climbing in early action, with bond yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y pulling back, the dollar DXY dropping and gold pointing to the first loss in eight sessions.

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The buzz

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Ford shares (F) are higher after the auto giant announced plans to expand hybrid EV offerings.

Conagra (CAG) is surging towards an 8-month high after the food brands group's forecast-beating expectations and outlook boost.

Levi stock (LEVI) is rallying after the denim maker boosted its forecast.

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A cluster of Fed speakers are ahead: Philly Fed Pres. Patrick Harker at 10 a.m., Richmond Fed Pres. Tom Barkin at 12:15 p.m., Chicago Fed Pres. Austan Goolsbee at 12:45 p.m., Cleveland Fed President Loretta Mester and Minneapolis Fed. Pres. Neel Kashkari at 2 p.m., then at 7:30 p.m., Fed. Gov. Adrinana Kugler, who said Wednesday that she sees inflation slowing and rate cuts in 2024.

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-Barbara Kollmeyer

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04-04-24 0931ET

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