A warning has been issued by a Bloomberg strategist, indicating that the surge in gold prices is transitioning from a store of value to speculative betting. Multiple technical indicators suggest this bull run may be nearing its conclusion. On March 17, Bloomberg commodity strategist Mike McGlone highlighted that by the end of February, the premium of gold prices relative to their 60-month moving average had climbed to its highest level since 1980. Furthermore, the 180-day volatility reached 2.4 times that of the S&P 500, marking a 20-year high. McGlone views this price level as "the best a bull market can get" and draws comparisons to the historic peaks of 1980 and 2011. He further emphasized that if gold prices lack sustained support from a 1970s-style inflationary environment or extreme geopolitical events, the risk of a correction towards $4,000 per ounce is increasing. This week, while the US dollar index fell for two consecutive sessions, the spot gold price remained largely unchanged, hovering near $5,000 per ounce.

The stretched valuation is being compared to the 1980 and 2011 highs. Mike McGlone draws a parallel between the current situation and the gold price surge from 2001 to 2011. During that period, after gold hit a high of $1,921 in 2011, that level was not surpassed until 2020. The current rate of price appreciation has exceeded that of the previous rally, thereby increasing the pressure for a mean reversion. Notably, the "gold rush" of 1979-1980 occurred against a backdrop of US CPI nearing 15%, whereas the current US CPI stands at just 2.4%. McGlone argues that such an extreme price increase in a relatively moderate inflationary environment is itself evidence of an overheated valuation. The ratio of the gold price to its five-year moving average had already risen to 1.6 times the historical high by 2026; the only precedent for reaching this level historically was during the price peak of 1979-1980. Additionally, the ratio of the S&P 500 to the gold price fell to 1.32 on March 13 and is showing a trend towards 1. McGlone points out that a continued decline in this indicator suggests the relative strength of gold versus equities may have reached its limit.

More alarmingly, a rare divergence has emerged between high gold volatility and low stock market volatility. Gold's 180-day volatility is at 2.4 times that of the S&P 500, a high not seen since 2006, while stock market volatility remains at very low levels. McGlone believes that if stock market volatility increases and the gold price rally recedes, the previous strength of gold could become a constraint. Essentially, the rise in gold itself might signal greater pressure ahead for all assets, particularly equities.

The gold-to-oil ratio has reached a historical extreme, making mean reversion pressure impossible to ignore. By the end of February, the ratio of gold to WTI crude oil prices rose to 79. Historically, levels exceeding this have only occurred under extreme circumstances, such as in April 2020 when oil prices turned negative. As of March 13, the ratio remained high at 51, while its 100-year historical average and mode are both close to 20. McGlone indicates that this ratio, between the ancient store of value and the most important industrial commodity, nearing a record high could be a sign of a peak in gold prices. The next major move in the commodity markets might be a reversion of gold prices towards their mean. Regarding oil, McGlone suggests that while tensions involving Iran and related geopolitical shocks could cause a brief spike in oil prices, such supply shocks are typically unsustainable. This is because high prices would incentivize increased supply, led by the US and the Western hemisphere. If tensions ease and support from the oil side weakens, it would further increase the pressure for gold to fall back towards $4,000.

McGlone's conclusion is that 2026 could mark a multi-year peak for gold, strikingly similar to the historical highs of 1980 and 2011.