Gold's $5000 Price Is A Speculative Peak, Strategist Warns

Gold Premium Hits Highest Level Since 1980

Bloomberg strategist Mike McGlone warned on March 17 that gold's rally toward $5,000 an ounce has transitioned from a store-of-value investment into a speculative bet. The analysis highlights that by the end of February, gold's price premium relative to its 60-month moving average reached its highest point since 1980. McGlone identifies this valuation stretch as the "best-case scenario for a bull market," drawing direct comparisons to the historic price peaks of 1980 and 2011.

The current price surge is particularly notable given the macroeconomic backdrop. The 1979-1980 gold rush occurred while U.S. CPI was approaching 15%. In contrast, the current rally is happening with U.S. CPI at just 2.4%. McGlone argues that such an extreme price move in a relatively moderate inflationary environment is itself evidence of a speculative frenzy, increasing the pressure for a price reversion.

Volatility at 2.4x S&P 500 Undermines Safe-Haven Status

A critical warning sign is the abnormal divergence in market volatility. Gold's 180-day volatility has climbed to 2.4 times that of the S&P 500, a level not seen in 20 years. This dynamic has led McGlone to state that gold is "no longer a store of value" in the current environment. The strategist cautions that this imbalance, where gold is highly volatile and equities remain calm, is unsustainable.

This relative strength may be reaching its limit. The ratio of the S&P 500 to the price of gold fell to 1.32 on March 13, trending toward parity and suggesting gold's outperformance against equities is exhausted. McGlone believes that if stock market volatility begins to rise, as historical patterns suggest it will, gold's recent strength could become a liability, potentially accelerating a sell-off.

Gold-to-Oil Ratio Nears Record, Signaling Mean Reversion

The relationship between gold and crude oil provides another bearish signal. At the end of February, the price ratio of gold to WTI crude oil rose to 79, a level only surpassed in April 2020 when oil prices briefly turned negative. As of March 13, the ratio remained elevated at 51, far above its 100-year historical average of approximately 20.

McGlone interprets this near-record ratio as a classic sign of a market top. He projects that the next major trend in commodities will be a mean reversion, where gold's price corrects downward relative to industrial commodities like oil. This dynamic reinforces the risk of gold falling to $4,000 an ounce and solidifies the view that 2026 could mark a multi-year peak, echoing the patterns of 1980 and 2011.