Precious metals were the only major commodity sector to rise and hold their gains, but the rally may have gone too far. Bloomberg Intelligence analyst Mike McGlone believes gold could reach a sustainable peak in 2026 and face a reversal during the second half of the year.
According to McGlone, the commodity market can be summarized in one chart: precious metals are the only sector that moved higher and remained elevated. He described the other commodity segments as “dummy stocks,” suggesting they have failed to generate lasting momentum.
Why Gold May Be Vulnerable to a Reversal
McGlone described gold as the “beta” of the metals market and the leading force within the broader commodity sector. As a result, gold’s performance has an outsized influence on the direction of the entire group.
After its record-setting rally, however, he sees growing downside risk. The analyst pointed to a large red annual candlestick forming after gold reached a record high near $5,500 per ounce in the first quarter. In technical analysis, such a candle can signal weakening momentum and a possible reversal after a powerful advance.
McGlone also highlighted a historical comparison. The last time gold traded at a similar premium to the broader Bloomberg Commodity Index was in 1980, after which the metal entered a prolonged decline.
He noted that inflation is an important difference between the current environment and 1980. Even so, he believes today’s conditions increase the risk that gold prices eventually normalize relative to the rest of the commodity market.
Commodities Face a Difficult Test Against Stocks
McGlone also examined the relationship between commodities and the stock market. He warned that the Bloomberg Commodity Index’s rise to a new high in the first half of the year may prove temporary.
At the same time, the index remains close to a record low relative to the total return of the S&P 500. According to McGlone, this leaves commodities with only one clear path to outperformance: a major decline in the stock market.
He described the setup as a “lose-lose” situation for commodities. If equities continue rising, commodities may keep underperforming. If stocks fall, broader risk-off pressure could also drag commodity prices lower.
The key difference from the commodity market bottom relative to stocks in 2000 is gold’s exceptional performance. McGlone said the precious metal has already outpaced the rest of the sector by a wide margin, and the coming months will show whether that gap is sustainable.
Please note, this site provides content for entertainment purposes only and does not offer financial advice. Read more here
