Mike McGlone, Senior Market Strategist at Bloomberg Intelligence, issued a bearish outlook for gold through 2026 in his mid-year commodity report, noting the precious metal reached its highest valuation relative to U.S. Treasuries in nearly 40 years during the first quarter. McGlone stated that U.S. bonds could become a cheaper and more attractive safe-haven asset than gold if equity market momentum slows, as Treasury yields reached approximately 5.20% in May — the highest level since 2007. The analysis comes as the Federal Reserve left interest rates unchanged at its June monetary policy meeting while projecting support for a rate hike by year-end, with Chair Kevin Warsh emphasizing a focus on price stability amid persistent inflation concerns.
Gold Reaches 40-Year Valuation Peak Against Treasuries
McGlone highlighted that gold's first-quarter valuation relative to Treasuries marked a nearly four-decade high, creating conditions where bonds may reclaim safe-haven status at current price levels. "The T-bond index has been plunging vs. the S&P 500 since 2021 on the back of the biggest money pump in history," McGlone stated in his report. "Will T-bonds, which reached about 5.20% in May — the highest yield since 2007 — continue melting vs. stocks, or might the flush mark an endgame? We lean to the latter, notably due to the vast room for reversion."
The strategist noted that while gold delivered its best annual return since 1979 in 2025 with gains exceeding 60%, the current market environment favors equities. "Gold grabbed alpha in 2025 — its best year since 1979 — but the only game in town seems to have shifted to stocks, which could be a lose-lose for gold," McGlone explained. "Higher equities may mean higher rates and competition. If stocks deflate, T-bonds might win."
McGlone identified the global COVID-19 pandemic as the initial buy signal for gold relative to bonds, but indicated the Federal Reserve's renewed inflation focus could signal the end of this six-year trend. He pointed to historical patterns showing gold posted negative returns in seven of the past 26 years, with six of those years dominated by monetary tightening and higher real yields.
Federal Reserve Signals Potential Rate Hike by Year-End
The Federal Reserve maintained interest rates at its June monetary policy meeting while updated economic projections indicated support for a rate hike by the end of the year. Federal Reserve Chair Kevin Warsh emphasized the central bank's focus on price stability during the meeting.
"Gold looks vulnerable in 2026 if tightening and rising real yields become the dominant macroeconomic regime," McGlone stated. "The metal posted negative returns in seven of the past 26 years, and six of those were dominated by tightening and higher real yields; in the seventh, no strong theme emerged. By contrast, gold rose in each of the five years when de-dollarization or reserve diversification led, with 2025 delivering its strongest return (more than 60%) in the past 26 years."
Silver Faces Downward Pressure Despite Industrial Demand Strength
McGlone projected that silver will follow gold's downward trajectory in 2026 despite solid fundamentals and industrial demand that would typically support higher prices. He noted that silver is currently 18% undervalued given the strength of the manufacturing sector.
"Silver is unlikely to escape gold's pull lower, even with robust industrial demand and a physical deficit, leaving economic drivers as the key constraint on a sustained rebound," McGlone stated in his report.
The analysis attributes silver's vulnerability to its correlation with gold price movements, which McGlone expects to override positive industrial demand signals in a tightening monetary policy environment.
FAQ
Why does McGlone expect gold to struggle in 2026?
McGlone stated that gold looks vulnerable in 2026 if monetary tightening and rising real yields become the dominant macroeconomic regime. He noted that in six of the seven years when gold posted negative returns over the past 26 years, tightening policies and higher real yields dominated market conditions. The Federal Reserve's focus on price stability and projected rate hikes create an environment where U.S. Treasuries may become a more attractive safe-haven asset than gold.
What is the relationship between gold and Treasury bonds according to the report?
McGlone indicated that gold reached its highest valuation relative to U.S. Treasuries in nearly 40 years during the first quarter. He explained that the global COVID-19 pandemic marked the initial buy signal for gold relative to bonds, but the Federal Reserve's renewed focus on inflation could signal the end of this six-year trend. Treasury yields reached approximately 5.20% in May — the highest level since 2007 — creating conditions where bonds may regain their traditional safe-haven appeal over gold at current price levels.
How will silver perform if gold prices decline?
McGlone stated that silver is unlikely to escape gold's downward pull in 2026, even with robust industrial demand and a physical deficit in the market. He noted that silver is currently 18% undervalued relative to manufacturing sector strength, but indicated that economic drivers will act as the key constraint on a sustained rebound. The analysis suggests silver's correlation with gold price movements will override positive industrial demand fundamentals in a tightening monetary policy environment.
