Low Volatility in U.S. Stocks Signals Risk, Gold's Advantage Over U.S. Treasuries Approaches Historical Highs

On September 3, Bloomberg commodity strategist Mike McGlone stated that the volatility of the U.S. stock market relative to gold is at its lowest level since 2007. As the market enters the traditional volatility season, this may affect the performance of gold compared to stocks and bonds in the second half of the year. McGlone pointed out that the ratio of the SPDR Gold ETF (GLD) to the iShares 20+ Year Treasury Bond ETF (TLT) is nearing historical highs, indicating that gold is performing strongly compared to long-term U.S. Treasuries. Historically, extremely low stock market volatility has been observed on the eve of the 2008 financial crisis, and it remains to be seen whether the market will repeat a similar scenario. After reaching approximately $5,600 per ounce in the first quarter of this year, gold may face similar pullback pressures as seen after the peak in oil prices in 2008. McGlone noted that there is a reversal effect in the commodity market following a "too rapid" increase. After oil peaked in 2008, it continued to weaken relative to the 60-month moving average, with price highs and lows gradually declining. At that time, the premium of oil relative to the long-term average reached its highest level since the 1973-1974 oil crisis. Gold reached a premium of about 2.2 times the 60-month average in February this year, a level not seen since 1980. The difference this time is that the speed of the current gold increase has set unprecedented records in a non-high-inflation environment, and future trends still need to be monitored.

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