(Kitco News) - Gold prices are holding firm near $3,370 an ounce after pulling back from a recent high of $3,454, with the Federal Reserve pausing interest rates and signaling it is “well positioned to wait.” But Mike McGlone, Senior Macro Strategist at Bloomberg Intelligence, says this period of stability may not last, warning that markets are underpricing a volatile mix of stagflation risk, geopolitical tension, and policy uncertainty.
In an interview with Kitco News, McGlone said, "The world is tilting toward recession and the Fed is still tight,” citing a “dangerous” gap between frothy asset prices and deteriorating fundamentals. “The key thing is the market is at risk of a pretty significant reversion,” he said. “It’s very expensive, very tilted long, and gold is still the outlier going up.”
Fed Policy Signals Rising Stagflation Risk
On June 12, the Federal Reserve held its benchmark interest rate at 4.25 to 4.5 percent, while revising its GDP forecast lower and raising its near-term inflation estimate. Fed Chair Jerome Powell acknowledged that tariffs “will push up prices and weigh on economic activity.” Despite projecting two rate cuts before year-end, Powell said the Fed can afford to “wait for clarity,” citing mixed signals in the data.
McGlone was skeptical. “The Fed is still tight in the face of clearly declining economic indicators,” he said. “It is dangerous to have the highest fed funds rate since 2007 and expect no consequences.”
Meanwhile, former President Donald Trump escalated pressure on the central bank this week, calling Powell “a real dummy” on Truth Social and suggesting he would like to appoint himself as Fed Chair. Trump has repeatedly called for steep rate cuts, claiming the current policy is “costing America billions.”
Gold Holding Gains Despite Pullback
Gold remains one of the few major assets showing strength in this environment. McGlone emphasized that the pullback from $3,454 to $3,370 is likely a healthy consolidation, not the start of a reversal. “Typically, when markets have reached extreme highs, they consolidate and resume trends,” he said. “To me, that’s what gold is doing.”
He added that gold’s resilience relative to other assets is a signal of ongoing distrust in monetary policy. “What’s happening in gold is a leading indication of what’s going to happen to the rest of the market,” he said. “It’s going up in most currencies and it’s not supposed to.”
McGlone also pointed to the continued accumulation of central banks. According to the World Gold Council, central banks added 290 metric tons in the first quarter of 2025, the strongest Q1 on record. This follows record annual purchases in 2022, 2023, and 2024, with buying driven by China, India, and other emerging economies looking to reduce reliance on the U.S. dollar.
Oil Risks Persist but Long-Term Trend Bearish
WTI crude oil is trading near $78 a barrel, lifted by Middle East risk premiums. Israel’s recent strikes inside Iran and reports that the U.S. is weighing potential airstrikes have raised fears of disruptions through the Strait of Hormuz, which handles nearly 20 percent of global oil flows.
Still, McGlone is not bullish on oil over the long term. “To me, that’s a price to sell,” he said. “The longer we hover around this level, the greater the risk that oil drops again. I’m very concerned that prices will decline back toward $40 or lower in a deflationary environment.”
He cited increasing energy efficiency, weakening demand growth, and potential deflationary pressures as longer-term headwinds.
Macro Calm Could Break Fast
McGlone said markets are complacent in the face of major risks. He flagged the concentration of gains in AI and tech stocks, the rally in junk bonds, and the lack of defensive positioning as signs that investors are not pricing in recession risk.
“We are in the early days of potential unwinding,” he said. “The big picture is that this is the most aggressive central bank tightening in our lifetime, and it is still filtering through.”
As for gold, McGlone believes it remains one of the best-positioned assets. “It’s still the top-performing major asset,” he said. “I fully expect gold to outperform equities and most commodities.”
To hear Mike McGlone’s full market analysis, including his views on gold, oil, interest rates, and portfolio positioning, watch the full interview now on Kitco News.