Gold's 'unique' trait as compared to other commodity trades

2024 has been an especially good year for commodities so far, where gold (GC=F) and silver (SI=F) prices continue to climb and crude oil (CL=F, BZ=F) has even pierced above $90 per barrel. Bloomberg Intelligence Commodity Strategist Mike McGlone explains the price action patterns seen in the commodity sector.

"What's really unique about gold is it's the only major commodity that usually goes up over time that's really making new highs versus the other commodities that are kind of bumping up against ranges," McGlone tells Yahoo Finance. "But what's really unique is there's been significant outflows in gold ETFs, but they have reached a level now that's pretty good supported. I think it's about time those outflows look to inflows, which would accelerate the gold rally."

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

SEANA SMITH: Before we get into the specific price action, talk to us just about what exactly is driving the price of gold higher and whether or not that trend, you think, still has some legs.

MIKE MCGLONE: Yeah, the answer is yes and yes. I think it's got a lot more room. The way I look at gold, it's just a matter of time it gets to 3,000. I don't want to admit I've been saying that for years, but it's finally breaking above that $2,000 an ounce level. And the foundation starts with the unlimited friendship between President Xi and President Putin.

That shifted the world order, and it's created a lot of people who are, you know, trying to get away from the dollar and focus on gold. So the largest pockets on the planet central banks, i.e. China and some India, are buying gold, continuing to do that. And I see that continue. And I don't see what stops it.

And what's really unique about gold is it's the only major commodity that usually goes up over time. It's really making new highs versus all the other commodities that are kind of bumping up against ranges, but what's really unique is there's been significant outflows in gold ETFs, but they've reached a level now that's pretty good support.

I think it's about time those outflows flip to inflows, which would accelerate the gold rally.

JARED BLIKRE: Yeah, it's been really fascinating for me to watch this because it looked like over the last four or five years, gold was just poised to break out in a big way, and each time it was a-- it was a disappointment. It was a false breakout. What gives? And here's a chart. Well, let me just do a little technical analysis here.

This is a five year chart of gold futures, and you can see we just accelerated to the upside. Simple measured move is putting this at least 3,000. What do you think when you look at the technicals here? You've already outlined the bull case but anything in particular in the gold futures or silver metal just really stand out to you that finally it is now popping versus the last few years?

MIKE MCGLONE: Well, Jared, you class-- you point out a classic technical position, and it's basically called maximum disdain. You have to frustrate the bull as long as possible and then finally go up when they kind of give up. And that's really what happened. You look at commitment of traders, which is managed money net futures positions kept bumping up against resistance and finally, it's breaking out. It was nowhere near overbought.

So like you said, I see gold now is just about 2,0000 resistance, which was a resistance now converting to support and now, what's about-- what's going to take to get to $3,000 resistance? The key thing to point out about gold is I have to repeat the same thing I've been saying for years.

It's really, I think, somewhat risky to hold gold anymore without some Bitcoin in that space, as it were gold's going digital. So the fact is just this year alone, there's been about $7 billion of outflows in gold TFs and about $12 billion in the new Bitcoin ETF. So there is a flip there.

There is potential that gold did demonetize silver and Bitcoin is in the process right now. It's maybe early days, early days of potentially demonetizing gold.

SEANA SMITH: Mike, let's talk about another commodity that is certainly on our radar and one that has been trending at Yahoo Finance, and that is crude. This movement that we have seen higher in the price of oil over the last couple of months. Do you think we're going to-- there's lots of talk about the fact that we could get above 90. We could head closer to that $100 a barrel level.

How likely is that do you think that we're actually going to push up against those levels versus maybe falling back to some of the lows that we saw not too long ago?

MIKE MCGLONE: What's more to [INAUDIBLE]. When you say crude oil, the first word we should say is autocorrelation. So you look at the price on the screen right now, $86 a barrel. That was first traded in October 2007. Since that time, gold's up 210%. So there's a bull market and here's a languishing bear market.

So the way I see crude oil is I don't think it's coincidence that crude oil bumped up a bunch above that 83 level, which I thought was a good threshold last week, and the S&P 500 tilted lower. See that risk now? The risk is for crude oil is really [INAUDIBLE]. If the stock market has a normal correction, crude oil is going to 50, which is what I see WTI going to 50.

It's not profound at all. That's been the highest volume, the kind of the pivot mean for basically almost 15 years now. So I think we're at the upper end of the range along with copper, and here's a key fact is on the year, I'd say a one year basis, the S&P 500 total returns around 30%.

In total return for the Bloomberg Commodity spot index, the spot index change is minus 2%. You have to ask yourself, what's it going to take with stocks going up that much and commodities going down? So the key thing I'll point out is-- I'll end with is we do have commodities getting cheap historically versus a stock market. We've been pointing that out for years, but the risk is that the stock market rolls over a little bit and high crude oil is not good for a stock market.