(Kitco News) - After reclaiming the $5,000 level on geopolitical uncertainty, gold is seeing some follow-through buying at the start of a new trading week; however, one market strategist warns investors that the precious metal’s elevated volatility does not bode well for further gains through 2026.
In a research note published last week, Mike McGlone, Senior Market Strategist at Bloomberg Intelligence, said that gold, which has significantly outperformed U.S. Treasuries and other commodities, could be approaching its endgame if market conditions start to normalize, adding that the current setup carries potentially deflationary implications for broader markets.
He noted that gold, which has been in an unprecedented uptrend since late 2022, has been outperforming other assets and commodities for decades; however, he added that the gains since mid-2025 through the new year have come with higher volatility. Many analysts have observed that in this environment, gold is acting more as a risk asset than a defensive play.
Spot gold last traded at $5,216.30 an ounce, up 2% on the day.
Because of gold’s overextended price action, McGlone said that a reversion to the mean could support U.S. Treasuries over the precious metal through the rest of the year. He noted that gold prices have reached their highest level relative to the Bloomberg Commodity Spot Index since 1960, while their level relative to U.S. Treasury yields is at its highest point since 1982.
“From a base of 100 in 2004, the TLT/GLD ratio at 39 on Feb. 28 may be too low,” he said in the note. “The ratio of TLT to SPDR Gold Shares (GLD) is the lowest in ETF history, and the US Treasury 30-year yield recently revisited 5% -- the highest since 2007. This crocodile jaw pattern is ripe for reversion, and 2026 may be the year.”
McGlone added that gold’s extreme premium and the potential for a reversal in risk assets could coincide with falling bond yields, reinforcing a broader deflationary backdrop rather than a renewed inflationary surge.
As for what could spark a reversion to the mean, McGlone said that elevated volatility in gold and silver could start to move into equity markets. He pointed out that 180-day volatility in the S&P 500 is at its lowest level in eight years, which may suggest historically elevated hazards for risk assets.
“The bottom-line for all risk assets is the S&P 500 may need to stay above 7,000 -- or else. Collapsing cryptos and spiking precious-metals volatility could trickle down to the stock market and US Treasury bond yields,” he said. “If TLT turns up vs. the S&P 500 and gold, it may signal a next big trade.”
McGlone noted that risk-aversion sentiment can already be seen in cryptocurrencies, as Bitcoin struggles to hold above $70,000. The leading digital currency last traded at $65,546 a token, down 3% on the day.
“Bitcoin led the way up and may also lead the way down,” he said. “Gold and silver going parabolic in 1Q, then crashing alongside Bitcoin, could presage a recovery in stock- and bond market volatility.”
