On Sept. 3, Bloomberg commodities strategist Mike McGlone said the current U.S. equity volatility relative to gold is at its lowest since 2007, while the market is entering a traditionally volatile season, which could impact the performance of gold, stocks, and bonds in the second half of the year.
McGlone noted that the ratio of the SPDR Gold Trust (GLD) to the iShares 20+ Year Treasury Bond ETF (TLT) is near an all-time high, indicating gold's strong outperformance versus long-term Treasuries. He pointed out that historically low equity volatility preceded the 2008 financial crisis, and whether the market will repeat a similar scenario remains to be seen.
After gold surged to around $5,600 per ounce in the first quarter of this year, it may face a pullback similar to oil's post-peak decline in 2008. McGlone said commodity markets tend to revert after sharp rallies. In 2008, crude oil weakened relative to its 60-month moving average after peaking, with lower highs and lower lows. The premium at that time was the highest since the 1973-1974 oil crisis.
McGlone noted that gold's premium to its 60-month moving average reached about 2.2 times in February, a level last seen in 1980. However, the current rally in gold is occurring at an unprecedented speed in a non-high-inflation environment, and the future trajectory remains to be watched.