Gold Soars, Risk Assets Collapse (Uncut) 04-15-2025

Gold Soars, Risk Assets Collapse – Is This the Biggest Macro Unwind Since 1929? | Mike McGlone

Welcome back to Kitco News, I’m Jeremy Safran. We’ve just come off one of the most volatile trading weeks of the year. Gold is still holding near record highs above $3,200 an ounce.

Oil and copper are tumbling and the dollar is sliding. Meanwhile, U.S. Treasury yields are rising even as equities wobble here. Now it’s an unusual combination that’s raising serious questions about whether the traditional flight to safety is breaking down.

And the Fed, well, it’s walking a tightrope. Inflation expectations are surging. The University of Michigan’s one-year outlook just jumped to 6.7%, the highest since 1981.

And now Goldman Sachs is turning more bullish on gold, raising its end-of-year price forecast to $3,700, citing central bank demand, ETF inflows, and of course, these rising recession risks. They say gold could spike to nearly $3,900 if a downturn does hit. And my next guest says gold may not just be a hedge anymore.

It could be on track to take down Bitcoin. He also warns that we’re entering a profound reversion cycle, one where risk assets crack and precious metals surge. Joining me now, of course, is Mike McGlone.

He’s a senior commodity strategist at Bloomberg Intelligence. Great to see you as always, Mike. Hello, Jeremy.

It’s great to be on, and it’s an exciting market to talk about. Yeah, yeah. We were talking about this before.

You almost can’t keep up with the news flow. I mean, it’s an exciting time. We know that gold is up nearly 25% year-to-date.

Bitcoin and equities have pulled back quite a bit here. Now, you’ve suggested this could be a profound reversion cycle. What exactly is breaking down in the relationship between gold and risk assets? Let’s get into it.

Well, it’s the most significant thing that’s breaking down in the macro of everything is U.S. stock markets going down. As you were doing the intro, I just brought up my latest. So far this year, we’ve dropped $6 trillion of market cap.

To put that in significance, we rallied $12 trillion last year, so we’ve taken back half of it. But that was the biggest pump in history as a classic sign of a bit of an extreme, and now we’re pulling back. But we have very good reason for doing that.

So when I mention that, that’s why I have to mention crude oil is going down, copper is going down, cryptocurrencies are going down, and bond yields should be going down, but they haven’t yet. It’s just a matter of time. The key thing I’m going to be publishing tomorrow, after we air this segment, is how we’ve only had a blip in the trend.

And the key trend that I think really matters, if you take the U.S. stock market divided by the rest of the world, we use the MSCI SUS, you can go back to 1969, it’s been in an uptrend since the bottom in 2008, straight uptrend, clearly ready for a breakdown. It’s only bottom to near that bottom of the uptrend. It’s nothing so far.

My bias is we’re going to break down through that uptrend. We have good reason to do it, what’s happening with U.S. leadership. And everything is going to trickle that way towards a normal deflationary cycle after the inflation, which means I still think gold and long bonds will be some of the best performing assets this year.

Yeah, interesting. I mean, the rotation has been fascinating to watch. I mean, we’ve seen a little bit of resilience within the S&P at least, but let’s get back to Bitcoin because you said Bitcoin can maybe, you know, maybe leading this depreciation here.

Others just argue that it’s just consolidating after that historic run of the past 100,000 ETFs still maybe bringing some legitimacy. Is there a case for Bitcoin’s resilience in this macro environment? So Bitcoin has been showing pretty strong risk adjusted resilience lately to the S&P 500 going down. So on the year, this first of all, this year has been a paradigm shift.

We have a new president, major shift in administration’s policies, and Bitcoin’s down about 10 percent, S&P 500 is down about 8 percent. That’s a good sign for Bitcoin so far. But overall, the Bloomberg Galaxy Crypto Index, which is one third Bitcoin, the 100, the 200 week moving average has rolled over.

It’s one of the first to do that. The 200 week moving average, I’m sorry, 200 day moving average on the S&P 500 has not rolled over yet. Volatility, the 200 day moving average VIX is just starting to recover.

It’s early days of these things starting to happen. The key way I like to watch Bitcoin and gold put in together is the Bitcoin to gold ratio. And I’ve been tracking this one for well before I came to Bloomberg over a decade ago.

And to me, that’s the key thing that’s breaking down. I expect that to continue. But I think people are learning this.

First, you mentioned ETFs. There’s been three months of outflows from Bitcoin ETFs right now so far, about a total of about five billion dollars. And there’s been significant inflows just February, March, April so far.

We’ve had 10, 20 billion of inflows in gold ETFs. So what’s happening is I think what’s happened is that massive rush for Bitcoin ETFs last year in the U.S. put in a significant peak. Remember, Bitcoin was kind of an insider’s market.

Now it’s mainstream. Everybody loves it. I’m like, OK, that’s kind of dicey.

At the same time, we had four years of outflows in gold ETFs. Now they’re shifting inflows. It’s just a question of how much that continues.

And my base case bias is U.S. stock market will continue to decline. That’s also the base case of Bloomberg Economics and Bloomberg Intelligence. And that means gold will continue to outperform, bonds will continue to outperform, and Bitcoin is still very much of a risky asset, continuing to decline.

But so far, I have to admit, it’s been showing divergent strength. I do think it’s going to go much lower than it is now, particularly if the stock market makes that next leg lower. Yeah, yeah, interesting.

I mean, what’s your long term forecast then? Let’s talk about that, because you got into this relationship about how the Bitcoin gold ratio looks like. But unpack it a little bit. I mean, you know, what is the path to 10 times Bitcoin to gold ratio? Yeah, so first of all, I do think Bitcoin has a good chance of going back to 10,000.

That’s only where it was a few years ago before the biggest money pump in history in 2020 and 2021. The Bitcoin to gold ratio right now is about 26. Bloomberg Economics, BCO, Bloomberg Economics models and my colleague Josh Daniels have created a model that shows very good overlay with Bitcoin to gold.

It shows it’s probably breaking down below that low around 17 back in Q4 and going to break down. So right now it’s around 26. Model says it’s going to break down in the case it shows it’s going to continue lower and it’s heading lower.

The question is, what shifts that? Will the model be wrong? Will something shift to make it go higher? And I don’t see that right now. The key problem I have with Bitcoin so far is, yes, it was a good asset to run up. Remember, some of us made a prediction to go to 100,000 when it was at 10,000 in 2020.

Got that one right. But now I think it’s mean reverting. The bottom line is it is a highly volatile speculative risk asset, and it’s already been pumped up to the key, I think, threshold of 100,000.

Last year, I think, put in a pretty good peak. The bottom line, it has millions and millions of crypto dependents. In 2009, there was one crypto that was Bitcoin.

Now there’s, according to CoinMarketCap.com, there’s 13 million of them, and all of them are correlated and all of them are dependents. Things like Ethereum are continuing to go down. Dogecoin is a joke.

It’s still worth $20 billion, which is kind of a joke. And then you look at the precious metals. Gold has three precious metals dependent.

Dependent silver, platinum, and now all those are only going up because gold’s going up because the fundamentals for the industrial special metals are tilting lower, like they are for copper and industrial metals. Is it going to get better with the rest of the world facing U.S. tariffs that have barely even started? So I think this is early days. I think what the volatility we’re seeing right now, maybe the market will be more orderly.

I mean, the VIX at around 32 right now, it’s still kind of high. But to me, it’s the beginning of a bear market in the U.S. stock market most people have not seen. And I think it’s going to be akin to 1999 peak and the 2008 peak.

And it’s just getting started. I’m looking for indications for that not to be the case. Bitcoin, gold’s in the space.

The key thing that really strikes me is Bitcoin was born of the financial crisis and it rallied on this massive pump in liquidity in the stock markets. Now it’s just starting to tilt down. It looks like it’s early days.

Some people say it’s a dip to buy. I say probably not. Yeah.

OK, interesting. I mean, the 10,000, that’ll have a lot of people talking. OK, we got to move on because we got lots to get into.

But we got to talk about this flight to safety. You know, we’re seeing that rare alignment. We talked about Treasuries, the dollar equities all selling off together.

Has the traditional safe haven structure been fractured? I mean, what’s the macro signal from gold outperforming both sovereign debt and crypto here? Gold outperforming crypto is not a big deal. Makes sense. Like I said, Bitcoin.

It’s certainly cryptos. The whole space is completely correlated to the Nasdaq in the stock market, and that’s heading lower. Bitcoin is more digital version gold, but we’re proving it’s more right now leverage beta and going down.

But it’s versus U.S. Treasuries that’s been the significant things. And sometimes it’s better for me to remind myself and viewers what I’ve been pointing out for over a year, that the gold is the most expensive ever versus the U.S. long bond market. Now we go back about 35 years.

It just keeps getting more expensive. The thing is, we’re having issues in this country with too much debt and the transition to the tariffs, creating more inflation that’s that’s transitory. And to me, the key thing is we are heading towards a severe deflation, which is very worthy of the inflation.

The bottom line is we see deflation in China, the world’s second largest economy. It’s 10, you know, deal at one point six six. I think the U.S. 10, you know, right now about four point four is going that way.

I’ve been early. But right now we’re seeing some deleveraging. We’re seeing the transition period.

And to me, the key thing is and I would publish it as we haven’t really seen a significant breakdown yet in the U.S. stock market versus the rest of the world. Now we’ve come back to the trend line and it’s trend line has been in line for in case in place for since 2009. So 16 years, we will break that trend line.

I think it’s going to happen this year. Then you see the serious deflation from the inflation. So I don’t think I think we’re early.

I think it’s a matter of time. We’re not we’re seeing significant austerity in this country. People push back on that.

But we are cutting back a lot. Way overdue. The Fed cannot ease because of what happened last year.

They eased to, well, not so much early, but the ease with the stock market and a tear and a tear and help boost it up. Now we have sticky inflation, most notably from the wealth effect. And everything is starting to roll over.

The key thing I like to point out is this is a paradigm shift in austerity and tariffs. It’s coming at the time when the stock market was just at one hundred and about a century high versus the rest of the world and versus GDP in this country. And now it has a trigger for reversion and it’s barely started.

Like S&P 500 down eight percent is nothing. Bloomberg Economics is expecting to go down to about to about four thousand. Right now, the S&P 500 is four thousand five thousand four hundred.

And that’s the case of the US recession. Right, right. So, I mean, let’s talk about the inflation expectations there, because obviously they’ve surged.

I mean, the University of Michigan just printed that six point seven on a one year, the highest since eighty one. But the long end of the Treasury curve is selling off while the Fed stands pat. I mean, is the bond market calling the Fed’s bluff? Well, it’s it’s less doing that, but the bond market did when the Fed first cost 50 and yields went up that they told the Fed to stop easing, yet they kept easing like, OK, this is a risk.

They shouldn’t have done it. The problem is the way it’s the foundation. Remember, the Fed, we created way too much liquidity, learned the lessons of too much liquidity inflation.

We got that and the Fed stayed low for too long. So, for instance, in the end of 2020, the US stock market made new started making new highs. That’s when the Fed should have started tightening.

That was a sign inflation picking up. They did not start tightening until start tightening until Q1 2022. So they were behind and then they tighten too much.

And now we have a situation where we had this massive fiscal fiscal deficit spending still driving the market. That’s going away. The Fed can ease because they created too much inflation by easing too much.

And that’s a whole thing is starting to trickle down. The key question is what stops it? Gold and commodities have been picking this up for years. I’ve been writing writing about this for years, how the whole commodity complex was showing a global recession.

Now it’s happening. So, for instance, the rest of the world facing terrorists in the US, where’s China going to export to? I mean, it’s a quote I heard from an economist in the last in the last 100 years, any country that wanted to get wealthy cozied up to the US. That’s just been flipped off.

China did it. Japan did it. Germany’s done it.

That those three right there, the predatory massive predatory exports and porters on the planet. They export about 25 percent of their GDP. And it’s just getting shut off where they can export to South America.

It’s just it’s what you like it or not. This is what it is. U.S. tariffs now on average, according to Bloomberg Economics, are about 21 percent.

That’s about the highest in about 100 years. The problem is U.S. stock market cap. The GDP is also about the highest in 100 years.

We have a little trigger for reversion. We’ve started that process. Where does it stop? And the key thing, remember, about bear markets is they’re volatile.

They’ll rip your face off and they’ll give you false hope. And I think that’s what people need to be aware of. Yeah.

Interesting. I mean, you’re talking about Trump’s one hundred and forty five percent tariffs on China in full retaliation here. And you like you just said, have said that these moves may start the start of this global unwind.

What are the implications of capital flows, particularly back in commodities here, what you’re looking at? Oh, get me out. GMTFO. Get me the heck out.

That was the acronym I learned in the trading pits from customers when they were not so happy about their positions. So first, I’ll get out of the U.S. Got it. We have a mercurial president who’s pissed off a lot of people.

That’s pressuring long bonds a little bit, but less so. Mostly stocks. I think it’ll be selling on rallies.

And the thing is, it’s just so expensive. This U.S. stock market is, again, most expensive ever versus MSCI XUS, and it’s just starting to revert again. But the trend’s still up.

We haven’t broken the trend yet. That’s a matter of time. And it has severe implications for the key thing.

I look from a commodity standpoint. Obviously, it’s bullish gold. I think gold’s probably putting a pretty good base now around three thousand.

It’s going to head into four thousand question of time. Anything in between there is for the traders, which I used to do. But it also fits in preexisting trends.

I already saw in crude oil. Crude oil had a problem with excess supply and declining demand, most notably from China. Excess supply from Canada to U.S. before the U.S. stock market corrected.

So it’s a matter of time. I think it’s a forty dollars a barrel. It’s not lower, but it’s got to shut off that excess supply and demand.

And the average cost of production is around 50. Copper just pumped up to a new high for the wrong reasons. Major disparity on tariff risk between U.S. traded copper and the rest of the world.

Five thirty seven was a high. Normal reverses down to four. I think it more likely gets to three dollars a pound.

And then, of course, the grains might do OK as long as they get a drought, which is an unlikely event. Yeah, interesting. I mean, it’s been fascinating to watch here.

So, you know, we got to we got to still look at some of these long term effects of the tariffs, because, you know, some say that these are inflationary in the short term, but ultimately would force domestic production and then supply chain resilience. Could this play into a longer term bullish case for you as industrial metals or energy here? The key thing to remember right now is we’re seeing a shift of the wealth from the equity market back to the heartland. I spent a little time in the heartland last week in Indianapolis.

That’s where I’m from, the Chicago area. And it’s it’s a major shift. And it’s been a stated goal of the administration of lower energy prices, lower yields and a good way to do this, get stock market go down.

So I think that’s a shift in the long term. Sure, it’s good, but it’s coming at a time when there’s only been two times in history, significant times in history. When you get the stock market, the two times GDP was nineteen twenty nine in the US, nineteen eighty nine in Japan.

Obviously, I was not there in nineteen twenty nine. But in nineteen eighty nine, it traded Japanese government bonds in the early 90s. And the yields did exactly what China’s been doing.

And then the rest of the world followed. That’s what we’re doing now. So I think the implications are there.

I don’t know what stops it. Just think of China now is completely dependent on fiscal monetary stimulus just for stability. Their housing market was many X’s excessively high versus Japan and just reverting.

So I see just a normal reversion, the lessons of too much, too much pump in the system of money, inflationary results, and you always get deflation from that. Now, most of the rest of the world’s already doing that. Look at Germany, look at China and the US is just fine.

So the key crocodile jaws I’m worried about is we see very declining lower yields in China, Japan, Germany, bond yields average around two percent, US is still two point four percent. And the US stock market just starting to roll over from the highest ever. Once that continues, that’s a normal deflationary force on a global basis, gets us a global recession.

US bond yields will probably drop down to a two handles question at a time, maybe this year. And what stops it is what I ask right now. The key thing people always talk to me about is liquidity will pump liquidity in the system, but that usually happens after risk assets go down.

And right now the Fed can ease inflation is too high because risk assets pumped up too much. And there’s also this mounting speculation that China or even Europe is reducing the US Treasury exposure. I mean, the long bond is continuing to sell off hard here.

How real is the threat of foreign divestment? Because, I mean, if Treasuries are losing appeal, but equities are also weakening, I mean, is there anywhere to hide? Besides things like gold, are we entering an environment where traditional portfolios just don’t work? People in gold, people will say Bitcoin, Bitcoin is too volatile and it’s also a risk asset. The key thing is when you have a somewhat stagflationary right now, inflation right now. I like to point out just the fact that US trade deficit was about a trillion dollars.

OK, that’s how much by adding tariffs, how much can you really add to inflation versus a six trillion dollar decline in S&P 500 this year so far? Just drop another six trillion. That’s a severe deflation. So that inflation is coming.

The key thing I want to point out is, yes, the rest of the world can divest their US Treasuries. Where are they going to go? You got four point four percent that US tending out. What are you getting in Canada right now? Less than three, Germany, Japan.

I mean, Greece even has lower yield. Just go ahead. I mean, it’s just the way it works.

In the meantime, yeah, sure, it’s a blip. But as far as the key thing I like to point out is that GDP in this country is higher, much higher in Japan, in China, which have very low yields. But the key thing I like to point out when people point out debt is that thirty six trillion dollars at the peak last year, the total market capital stock market was about sixty four trillion dollars.

That was a very small portion. It’s the point is once people start realizing that they’re doing already, they’re starting to get out of US equities and buy gold, you see that ETF flows are straight up this year. They’re all going to go to the Treasuries and US Treasury market is a sore thumb on a world basis.

It’s very high. Yields are very high. And that’s a it’s a I think that’s the sore thumb that’s going to revert at some point.

Yes, I’ve been early, but on a one year basis and year to date, total long bond hold position is flat. I mean, it’s better than the 10, you know, being inside than the stock market down 10 percent and Bitcoin down 10 percent. And crude oil down 15 percent.

Now, that’s a deflationary force, which I think is going to continue. Contrary to crude oil continued lower. Yeah.

You’ve been calling that for a while. I mean, I went back and I remember a video we recorded about six, seven months ago. You were even talking about it going lower.

I got to bring up gold miners because they’ve obviously lagged behind physical gold very badly. If gold breaks above that thirty five hundred or even touches four thousand like you’re talking about, do we see a major rewriting in mining equities? The problem I’ve had with gold miners for three years now, Jeremy, every single metals conference I’ve gone to, that’s been the top subject. Why are the miners and the equities not keeping up with the underlying gold? The key problem I’ve had with this is if the miners like GDX, for example, does not keep up with gold in an environment, the stock market is making record highs, what’s going to happen when Brady starts hitting lower, which it’s doing now? So yes, miners should continue higher with gold.

But gold is still driving. And in fact, gold’s driving the whole precious metals complex. So, yes, gold’s a little expensive versus bonds, which is I think is going to be the next big trade.

I’ve been wrong in that one for a while. Admitted in but haven’t really lost. You know, we haven’t really lost money in bonds.

Is once we see that inflection of the U.S. stock market actually breaking down versus most trend lines, it hasn’t done it yet. Then that flips the narrative towards treasuries and away from gold. But the bottom line is that we’ve had a decent bull market.

It’s just getting a little stretched. And how far is it going to go? Don’t really know. Can’t play in between.

But the number one thing I’m going to be publishing on is tomorrow is it’s all about the U.S. stock market. If it stabilizes, everything’s good. If it continues down, those bond yields are going to just do what they always have done in history.

It’s just making it as difficult as possible. Yeah. And to your point, Mike, I mean, there’s still a strong U.S. tech bid.

Retail isn’t really calculating here. If the correction is short lived, could we just be resetting before another leg higher, I mean, long term? Yeah, we could. I that’s not my big case base case.

I think it’s unlikely. I think we finally got the reasons to do a correction. And the bottom line with for me is this is a matter of time we get the bigger one.

This is a key thing that I started. You know, some of us started writing about this two years ago. I started calling for $50 crude oil when it first went above 100.

It’s the way cycles work. The prices goes up too much and makes it go down. Same thing in the stock market, just much greater lag.

The key point about is if you’re buying U.S. equities here now, you’re buying them just after they reach the highest apex versus the rest of the world and U.S. GDP in almost a century. So sure, we might get real bounces, but I think the whole world started to get this is just a risk asset that got too expensive and the road to reversion is difficult, but it’s the more you delay it, the worse it gets. And I think we’ve delayed it because some of some of us expected to start in 2023.

It didn’t. And what really happened is massive, massive fiscal stimulus. Now, some of that’s supposed to be being shut down.

But we know the Fed’s out of the picture. We can’t get the monetary anymore. And prices are just so high.

They’ve reached the higher plateau. How long can we stay there? We know that’s not too long now. You can’t do that in commodities too long.

It’s stock market. It’s just more of a lag. And I think it’s heading downwards.

Again, for me, Bloomberg Intelligence’s bottom line for the S&P 500 is around 4000 in the case of a U.S. recession and our tilt is towards a U.S. recession. OK, yeah, I mean, many people calling for it. Before I let you go, I got to get one final big picture question in.

I mean, you’ve compared today’s market structure to nineteen twenty nine, nineteen eighty nine, you know, the peak of U.S. exceptionalism. If we’re really on the other side of that peak, what does that mean for investors in the next, say, six to twelve months in terms of positioning here? I mean, you’ve been talking about it here. What are we looking for? Any other signs? Yes, the signs I’m looking for is it’d be nice if we can see one of the key leading indicators have been the Bloomberg Galaxy Crypto Index.

Now it’s already rolling over 100 week, 200 week moving average S&P 500 hasn’t yet. So you’re looking for signs like that. Maybe it can show early strength.

U.S. stock market showing resilient strength. That would be great. But I think the thing is the data usually lags.

But the problem is when you get to two times GDP, the stock market becomes the economy. Like I said, we’ve backed up six trillion dollars so far this year. That’s the wealth effect.

That’s what, 10 percent of the economy of GDP. It’s it’s just maybe it’s different this time. But that’s my point is this is almost inevitable that it won’t be different this time.

I think the trigger is this year for it to revert. It’s starting to. And so far we’ve seen nothing yet.

Yeah. All right. Mike McGlone, senior commodity strategist at Bloomberg Intelligence, breaking down one of the most critical macro shifts we’ve seen here in years.

As you can tell, I mean, gold rising, risk assets unwinding and traditional safe havens are flashing red. Thanks for this, my friend. Have a great week.

Thank you, Jeremy. You too. Thanks, Mike.

Will gold take the next lead as the global hedge? Is the Fed behind the curve? And what happens next for Bitcoin, oil and the U.S. dollar? We’ll be tracking it all right here on Kitco News. Make sure to like the video. Subscribe to our channel so you don’t miss what’s coming next.

I’m Jeremy Saverin. We’ll see you next time.