Germany's Kluge took the silver medal in the world championships in London this year when Cavendish struggled and finished sixth, but he expects the Briton to mount a much stronger challenge in Rio.
Cavendish, like Kluge, has been juggling his professional road career with track training this year, and arrived in Brazil on the back of winning four stages on the Tour de France, increasing his overall tally to 30.
He pulled out with five stages remaining to focus on Rio, where he hopes to add a long-awaited Olympic medal to his CV.
"For a medal Cavendish is going to be dangerous," Kluge, who finished fourth in the six-discipline omnium in London, told Reuters after a training session in the Olympic velodrome.
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"After his performance at the Tour, Cav is at a high level.
"He has to make the switch to the track, but he's had four weeks and that's long enough.
"He was strong at the worlds but now he will be coming in with a real momentum and will be even stronger because he had two weeks on the Tour and had those victories."
World champion Fernando Gaviria is the favourite for gold but Kluge, who loaded his road schedule towards the early-season Classics and the Giro d'Italia before skipping the Tour, is confident.
"I feel really good. The last month has all been about the track," he said. "I've got the speed in the legs and I've been working on the flying lap to be a bit faster."
"In London there were some mistakes. But I'll give it everything I have to give to get to the medals positions."
The omnium starts on Sunday with the 60-lap scratch race. The other disciplines that make up the event are individual pursuit, elimination race, time trial, flying lap and points race.
(Reporting by Martyn Herman; Editing by Bill Rigby)
