Rare Bearish Gold Report: $5,000 Gold Price Too High, Comparable to 1980 and 2011 Peaks

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Source: Zhitong Finance Network

Bloomberg strategist warns that the surge in gold prices is shifting from a store of value to speculative bets, with multiple technical indicators suggesting this bull market may be nearing its end.

On March 17, Bloomberg commodities strategist Mike McGlone noted that by the end of February, the premium of gold over its 60-month moving average had risen to the highest level since 1980. The 180-day volatility reached 2.4 times that of the S&P 500, hitting a 20-year high.

McGlone believes this price level is “the best that a bull market can reach” and compares it to two historic peaks in 1980 and 2011.

He further emphasizes that unless gold can sustain the inflation environment of the 1970s or extreme geopolitical events, the risk of a pullback to $4,000 per ounce is increasing.

This week, the US dollar index has declined for two consecutive days, but spot gold prices have remained nearly unchanged, staying around $5,000 per ounce.

Overextended Valuations, Comparing 1980 and 2011 Peaks

Mike McGlone compares the current situation to the gold rally from 2001 to 2011.

Back then, gold hit a high of $1,921 in 2011, a level that was not surpassed until 2020. Currently, the pace of gold’s rise has exceeded that rally, increasing pressure for mean reversion.

Notably, the “Gold Rush” of 1979-1980 occurred amid near 15% inflation in the US, whereas the current US CPI is only 2.4%.

McGlone argues that such extreme increases in gold prices in a relatively moderate inflation environment are evidence of overvaluation.

The ratio of gold to its five-year moving average reached 1.6 times the historical high in 2026, with the only previous instance at this level being during the peak of 1979-1980.

Additionally, the S&P 500 to gold ratio fell to 1.32 on March 13 and is trending toward 1. McGlone points out that the continued decline of this indicator suggests that the relative strength of gold compared to stocks may have reached its limit.

Even more concerning is the rare divergence between gold’s high volatility and the stock market’s low volatility. Gold’s 180-day volatility reached 2.4 times that of the S&P 500, a high not seen since 2006, while stock market volatility remains very low.

McGlone believes that once stock market volatility rises, gold prices may retreat, and the previous strength of gold could become a limiting factor, indicating that the rise in gold may foreshadow greater pressure on all assets, especially stocks.

Gold-Oil Ratio Hits Historic Extremes, Mean Reversion Pressure Not to Be Ignored

At the end of February, the gold to WTI crude oil price ratio rose to 79, a level only exceeded during the extreme event of oil prices turning negative in April 2020.

As of March 13, the ratio remained high at 51, while its 100-year average and mode are both close to 20.

McGlone points out that the ratio of this ancient store of value to the most important industrial commodity is approaching a historic high, possibly signaling a top in gold prices. The next major move in commodities may be a reversion to the mean.

Regarding oil, McGlone believes that although geopolitical tensions involving Iran and related shocks could temporarily boost prices, such supply shocks are usually unsustainable, as high oil prices will incentivize increased supply from the Western Hemisphere led by the US.

If tensions ease and support for oil prices diminishes, it will further pressure gold to fall back toward $4,000. McGlone concludes that 2026 could see a multi-year peak in gold, echoing the historic highs of 1980 and 2011.

This article is reprinted from “Wall Street Insights,” with Zhitong Finance editing by Li Fo.

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