Bloomberg: Low Stock Market Volatility May Signal Risk, Gold's Relative Advantage Over Treasuries Nears Record High

BlockBeats News, September 3rd, Bloomberg Commodity Strategist Mike McGlone wrote that the current US stock market volatility is at its lowest level relative to gold since 2007, and the market is entering the traditional volatility season, which may affect the performance of gold, stocks, and bonds in the second half of this year.

McGlone pointed out that the ratio of the SPDR Gold ETF (GLD) to the iShares 20+ Year US Treasury Bond ETF (TLT) that he tracks has reached near-historic highs, indicating that gold is in an extremely strong position relative to long-term US bonds.

He mentioned that historically, very low stock market volatility has occurred on the eve of the 2008 financial crisis, and it remains to be seen whether a similar situation will unfold in the current market.

After gold surged to around $5600 per ounce in the first quarter of this year, it may face similar downward pressure as seen in oil prices after peaking in 2008. McGlone pointed out that the commodity market experiences a reversing effect after a rapid rise. After oil reached its peak in 2008, it continued to weaken relative to the 60-month moving average, with price highs and lows gradually declining. At that time, oil's premium over the long-term average hit the highest level since the 1973-1974 oil crisis.

Gold reached about 2.2 times the 60-month average in February this year, a level that was last seen in 1980. However, unlike in the past, the speed of this gold rally has set unprecedented records in a non-high inflation environment, and the subsequent trend needs further observation.