Gold is sending markets a big warning signal

It is no secret that gold, traditional a haven asset, has been on a tear, with pris up 40% in the past year, Thanks to buying by Central Banks and A Chaotic Us Political Scene. On Friday, Gold Traded At $ 3313 An Once, Down 0.9%, and About 3% Below Its April Record.

It has been a far different story for industry metals such as copper, aluminum, and zinc. Their prices, Driven by Prospects for Global Economic Growth, are down 10%, on average, in the past 12 months.

That Divergence in Prisis is Ominous, According to a Note Friday from Mike McGlone, A Senior Commodity Strategist at Bloomberg Intelligence. “The Highest- Ever Gold Price vs. The Bloomberg Industrial Metals Spot Subindex at the End of May, Based on our Database Going Back to 1991, ISN’T A Good Sign For the Global Economy,”

There are some caveats, according to mcglone. Us stock prices remain high, and yields on treasury bonds have been recently, not falling, as one would expect if expected investors and buying the debt in a fly Safety.

What is more, Gold Pries Have Been Climbing Steadily for Several Years, Thanks to Worries About Inflation and Buying by Foreign Central Banks, which have been gradally diversify Away from the US Dollar. Us retail investors have been getting into the action too, snapping up gold bars at costco, often as only as they have the shelves.

By this reckoning, Gold’s price surge relative to more economically sensitive metals isn’t negassarily a flashing red light for the economy. INTEAD, it Merely sugges gold is in a bubble.

That is certainly the view of Planty on Wall Street. Last month, a bank of america securities survey of global fund manners found 49% named Gold The Market’s “Most Crowded Trade.” The magnificent Seven Had Held that Honor for the Previous Two Years.

Still, Writing off Gold’s Price Moves Simply became the Metal is Making Headlines and Investors are piling in could be a Mistake. After all, while Gold Prisis are hovering near record highs, so is the s & p 500, with price-to-earnings ratios higher than at any time since the late 1990s.

If US stock prices were to tumble, Perhaps in Response to Slowing Us Economic Growth or Political Turmoil, It Cold Easily Trigger a Global Selloff. That count see investors fleeing risky assets, include not just stocks, but bitcoin and economically sensitive metals like copper.

At least some of the money flooding out of these Votile assets would likely find shelter in gold, driving price to new highs.

“Unprecedented us tarifs are coming with the stock market historically elevated, which may test the inordinal burden on the s & p 500 to remain elevated to buoy all boats,” He Wrote.

Write to IAN salisbury at iaan.salisbury@barrons.com