Gold’s record has room to run as crude oil, US stocks teeter

This analysis is by Bloomberg Intelligence Senior Commodity Analyst Mike McGlone. It appeared first on the Bloomberg Terminal.

The Bloomberg Commodity Spot Index’s 2025 gain of about 8% to March 28 is attributable to the stalwart metals, and at potential risk if the US stock market keeps sliding. Can copper beat gold in a year of unprecedented US austerity and tariffs, with China increasingly relying on stimulus? Our performance bias is with gold. But at $3,000 an ounce the stretched bull may need to be fed, and a top candidate to do so is further reversion in US equities and Treasury-bond yields. The Trump administration’s goals for lower energy prices and yields have the benefit of preexisting trends.

CME-traded copper’s $5.37-a-pound record high on March 26 could have a similar fate as 2024’s $5.20 peak, which subsequently bottomed near $4. In grains, ample South American supply suggests it may take a Corn Belt drought to avoid lower prices. 

Abundance vs. high stocks

Hot for a reason: Gold vs. a shift in the post-WWII world order

Commodities and gold are recovering from recent multidecade lows vs. the US stock market, and that trend may have lots of room to run, with worthy catalysts. Unprecedented US austerity and tariffs, along with deflation from China akin to Japan about 30 years ago, could sustain the precious metal as 2025’s top performer. 

Normalization may be at hand: Gold vs. US stocks

The inordinate burden on a rising US stock market to lift all boats may have reached an apex, with deflationary implications for commodities except gold. Our graphic shows the per-ounce price of the metal divided by the S&P 500 breaching 0.50 — a key threshold in 1972 and 2007. The pandemic and Russia’s invasion of Ukraine were historical distortions that pumped money, commodities and asset prices to unsustainable levels, as evidenced by WTI crude oil at about $70 a barrel on March 28 vs. 2022’s $130 high. 

Crude and the grains are on track for low-price cures, and if US stock-market-cap-to-GDP reverts toward the 2000 high near 1.5, buoyant copper and base metals will face similar deflationary forces. What stops it is a key question, and unprecedented US austerity and tariffs could add fuel to typical downward cycles.

Lots of reversion room, with a worthy catalyst

Multidecade lows in the Bloomberg Commodity Spot and Hang Seng indexes vs. the S&P 500 in 2024 may have found a spark for recovery. The unprecedented combination of the Trump administration’s austerity and tariffs at a time of accelerating deflationary technology — as evidenced the latest BYD electric vehicles able to charge for about a 250-mile range in just five minutes — might suggest some normalization of elevated US equity prices. Our half-century chart shows the vast room for Chinese stocks and commodities to catch up to beta. 

But it’s the potential for the S&P 500 to revert some of its roughly 10x gain since 2009 that may be 2025’s most powerful force for deflation reciprocal to the inflation. If US stocks stabilize, energy and grain prices still face downward paths, but if beta keeps reverting, deflation may reign.

Commodity consistency: Gold beating crude

Gold at the top of our annual-performance dashboard and crude oil at the bottom may gain momentum if the US stock market declines. One of the most enduring trends in commodity prices since 2008 has been a rise in the number of crude barrels equal to an ounce of gold, along with growing US government budget deficits and energy-output surpluses. At about 44 on March 28, gold/crude is up from its nadir of just below seven about 17 years ago. What stops the store of value from outpacing most commodities is a top question, and a prerequisite for gold to lose some of its luster is competition from rising US rates and equities. That may be changing, as shown by gold ETFs shifting to substantial inflows. 

Bitcoin’s $100,000 threshold is looking increasingly like 5,000 in the Nasdaq 25 years ago, with risk-asset implications.

Deflation from the inflation may be commodity tilt

The most supply-to-price elastic sector — the grains — at the bottom of our annual-performance dashboard and precious metals at the top are due to the distortions of 2020-22. Where and when do the trends stop? Low-price-cure paths in corn, soybeans and wheat appear similar in oil and natural gas, and absent supply shocks, gravity-pull forces could be toward 2019 levels. That’s about $57 a barrel in WTI crude, which is roughly the US break-even price.

US-traded copper has been a 2025 stalwart, but because of tariffs that haven’t yet been implemented. The record $5.37 a pound on March 26 could be at risk of similar reversion as 2024’s $5.20 peak. The bottom came at about $4. That gold has only three companions — silver, platinum and palladium – may show its attributes vs. Bitcoin, which has millions of crypto dependents. 

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