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Most investors are now in the process of rebalancing their portfolios with the resurgence of inflation concerns. But for Bloomberg Intelligence, a mix of Bitcoin (BTC), gold, and bonds would be the winning combination for 2022.
Bloomberg Intelligence senior commodity strategist Mike McGlone warned that this year’s inflationary spike in commodities could be followed by a reversal, Kitco News reported. Under this scenario, a combination of the three asset classes could be the best bet as the mix would likely outperform others.
“Sustained inflation from commodities may be more elusive than ever,” McGlone wrote. “We expect 2022 to be a good test and a similar price cure as peaking grains in 2021. The propensity for money supply and the stock market to sustain about 40% appreciation since the end of 2019 is low. A Bitcoin, gold, and long-bond combination may outperform in most scenarios. Commodity supply and demand elasticity are ripe in 2022 to regain pre-pandemic force.”
McGlone likewise gave gold a positive outlook for 2022. After establishing support of $1,700 this year, the precious metal is primed for an upward trajectory next year.
“Gold recovering from around $1,700-an-ounce support and the inability of the Treasury long-bond yield to sustain above 2% may be sniffing out a resumption of the predominant deflationary forces prior to 2020,” the analyst added. “Gold … [is] looking like a resting bull market, cleansed by a correction. When priced in fiat currencies, the metal has a greater propensity to rise, notably since its supply is limited, contrary to currency. Gold and Bitcoin have high potential to continue advancing in price, notably, if Treasury yields resume enduring downward trajectories, following Japan and most of Europe.”
McGlone also predicted that inflation could likely reach its highest level next year. However, he warned that its descent would be gradual.
“The commodity and inflation bar is too high for sustaining this year's advances in 2022, based on history,” the strategist explained. “The last two times the Bloomberg Commodity Spot (BCOM) reached record highs (2008 and 2011), CPI also rose, but it wasn't too long afterward that the inflation gauge turned negative. We see greater forces of the cure for higher commodity prices potentially coming to fruition in 2022.”
McGlone noted the increasing preference of Bitcoin (BTC) over gold by investors. “Rapidly advancing technology and ingenuity are empowering humans to produce most commodities, notably crude oil and natural gas, at lower costs,” he added. “Bitcoin is replacing gold in portfolios and becoming the global digital reserve asset in a world going that way. Some reversion of the 2021 commodity bounce may feel like a crash.”
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