Gold to Outperform Silver This Year as Recession Risks Build, Says Bloomberg Intelligence
The comments below are an edited and abridged synopsis of an article by Anna Golubova
Gold is looking to outperform other commodities this year, including silver, platinum and palladium, as US recession risks rise, according to Bloomberg Intelligence.
Gold’s rally will accelerate in the second half of 2023, taking the gold:silver ratio higher. Currently, it sits at around 80 (80 ounces of silver will buy one ounce of gold). At its peak in March 2020, the gold:silver ratio was around 124. The higher the ratio, the more expensive gold is compared to silver.
“The price of gold has had a propensity to outpace silver since Isaac Newton adopted the gold standard in 1717 as master of Great Britain’s Royal Mint and may accelerate in 2H. At about 80 ounces of silver per gold, the cross rate is roughly the same as the financial crisis high and well below the 124-ounce peak from March 2020,” said Bloomberg Intelligence senior macro strategist Mike McGlone.
As the US enters a recession, that ratio is heading to all-time highs, with the 80-range acting as the floor.
“As the US leans into a recession, the ratio is more likely to head toward the all-time high and may be forming a foundation around 80. If consensus for a soft landing turns out to be more of a bust worthy of the liquidity-fueled boom to the 2022 stock market peak, gold appears more inclined to extend to new highs vs. silver,” he wrote.
Silver will have its opportunity to catch up at the end of a recession, McGlone said.
Gold versus platinum also looks encouraging, with gold known to outperform platinum during recessions, and it has even more significant upside potential versus palladium.
Gold is up around 9% during the last 12 months. In comparison, the Bloomberg Commodity Spot Index is down around 24% during the same period. And with the Fed now facing the consequences of its most aggressive tightening in decades, gold’s outlook remains bullish.