Rare bearish gold report: $5,000 gold price is too high, comparable to the peaks in 1980 and 2011

Why do AI and Bloomberg strategists compare current gold prices to historical highs?

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

On March 17, Bloomberg commodities strategist Mike McGlone pointed out that as of the end of February, the premium of gold relative to its 60-month moving average reached its highest level since 1980, and the 180-day volatility hit 2.4 times that of the S&P 500, 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 support from 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, holding around $5,000 per ounce.

Overextended Valuations, Comparing Peaks of 1980 and 2011

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

Back then, gold reached 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.

It’s worth noting that the “gold rush” of 1979-1980 occurred amid high inflation with US CPI approaching 15%, whereas the current US CPI is only 2.4%.

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

The ratio of gold price to its five-year moving average has risen to 1.6 times its historical high by 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 downward toward 1. McGlone notes that the continued decline of this indicator suggests that gold’s relative strength 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 has 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—implying that the rise in gold might foreshadow greater pressure on all assets, especially stocks.

Gold-to-Oil Ratio Hits Historic Extremes, Mean Reversion Imminent

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 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 near a historic high, possibly signaling a gold top. The next major move in commodities may be a reversion of gold prices toward the mean.

Regarding oil, McGlone believes that although geopolitical tensions involving Iran and related shocks could temporarily spike oil prices, such supply shocks are usually unsustainable because high oil prices tend to stimulate increased supply from the US and other Western Hemisphere producers.

If tensions ease and support for oil weakens, this could further pressure gold prices down toward $4,000. McGlone concludes that 2026 may mark a multi-year peak for gold, echoing the peaks of 1980 and 2011.