(Kitco News) - Investors looking to hedge against global economic uncertainty continue to pile into gold, pushing prices to $3,400 an ounce. According to one market strategist, gold’s appeal will continue to grow as recession fears intensify.
Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, wrote in a research note Tuesday that the growing discrepancy between oil and gold prices is sending strong signals that economic conditions may continue to deteriorate to historic levels.
“In 100 years of annual performance, 2025’s year-to-date decline of almost 21% in oil prices versus gold’s 26% gain has brought the disparity to nearly 50%—the fourth-largest difference from 1925 to 2025,” he said.
Gold prices started the new trading week on a strong note after testing support near $3,200 an ounce last week. Spot gold last traded at $3,411.90 an ounce, up more than 2% on Tuesday, following Monday’s nearly 3% rally. Meanwhile, oil prices fell below $56 a barrel on Monday. Although prices have since recovered from Monday’s sell-off, they remain below a critical resistance level. June West Texas Intermediate (WTI) crude oil futures last traded at $59.17 per barrel.
McGlone noted that gold’s 30% rally to last month’s all-time highs at $3,500 an ounce has put its trajectory in line with the gains seen in 2007 and 1935. Coupled with plunging oil prices, he said these two signals do not bode well for the economy.
He added that while tariff uncertainty and U.S. government austerity measures have exacerbated the price action, the current trend was already in place even before President Trump won last year’s election. Although gold appears overstretched and oil looks oversold, McGlone said he expects the current economic environment to continue supporting the trending price action for both commodities.
“We see crude's low-price cure near $40 a barrel and gold's next resistance at around $4,000 an ounce. A lower U.S. stock market may be a major force to get there,” he said.
McGlone reiterated his stance that he sees gold prices rising to parity with the S&P 500 as recessionary conditions push the broader equity market closer to 4,000 points.
“The SPX/gold ratio’s 100-year pattern shows a propensity to revert to 1-to-1 but not bottom there. Maybe the lessons of history and past patterns will be different this time, but Bloomberg Intelligence's S&P 500 fair value at 4,032 in the case of a recession may guide that price in ounces as a potential meeting place for gold,” he said. “The last time gold made an enduring peak in 2011, around $1,900, it roughly coincided with the ratio of the metal in ounces divided by the S&P 500 at about 1.5x. Now, it's only about 0.64x.”
Looking at gold’s downside, McGlone said the precious metal appears to be establishing a comfortable floor at $3,000 an ounce.
