Gold: Dubious Speculation

Key Concepts

• Bull Market Support Bands: Levels of price support during an upward trending market, tested repeatedly.
• Monthly RSI (Relative Strength Index): A momentum oscillator used to identify overbought or oversold conditions, but potentially unreliable for macro tops in gold.
• S&P 500 / Gold Ratio: A comparative metric showing the relative performance of stocks versus gold, mirroring patterns from the 1970s.
• M2 Money Supply: A measure of the money supply, used to assess gold’s valuation.
• Mean Reversion: The tendency of asset prices to revert to their historical average.
• Risk Assets: Investments with higher potential returns but also higher risk (e.g., stocks, cryptocurrencies).
• Parabolic Rally: A rapid and sustained increase in price.
• Total3 / Gold Ratio: A comparative metric showing the relative performance of total cryptocurrency market cap versus gold.

Gold’s Trajectory and Market Dynamics

The analysis focuses on the current state of gold, predicting its potential path forward, and contrasting it with other asset classes, particularly cryptocurrencies and stocks. Gold is currently around $4600 and is considered to be on a trajectory identified in 2020-2021, anticipating a move upwards, consolidation, and a breakout, ultimately reaching higher levels by 2025-2026 and into the end of the decade. A previous video posited gold reaching $6,000 in 6-9 years, a target still considered plausible.

Bull Market Support and Short-Term Expectations

The speaker advocates for “respecting the bull market” in gold, noting consistent support at bull market support bands in February 2024, November 2024, and August 2025. The time between these tests has been roughly 37-39 weeks, with approximately 24 weeks elapsed since the last test, suggesting another test is possible in 2026. A short-term “blowoff top” in metals is anticipated in the first half of 2026, though whether this will be the ultimate top remains uncertain.

The Limitations of Monthly RSI as a Timing Indicator

Despite the monthly RSI for gold currently being at 93-94 (a level not seen since 1973, coinciding with inflationary periods), the speaker argues it’s a “terrible indicator” for timing a macro top. Historical analysis reveals that in 1973, when the S&P 500 broke down against gold and the RSI reached 94, gold experienced a 30% correction. However, it subsequently rallied 600% over the next seven years. Selling based solely on the RSI in 1973 would have resulted in missing out on substantial gains. This illustrates that while a correction is likely, relying on the RSI alone can be misleading.

Gold vs. S&P 500: Echoes of the 1970s

The S&P 500 divided by gold is currently at levels similar to those seen in 1973, when a breakdown occurred. This historical parallel suggests a potential for a similar outcome, with gold continuing to outperform stocks. The chart shows a bounce mirroring the 1973 pattern, but now beginning to “roll over,” indicating a potential shift in dominance.

Gold vs. M2 Money Supply and Future Price Targets

Analyzing gold’s valuation against M2 money supply reveals that gold has recently broken through the high from 2011. The next significant level to break is identified, representing a potential 26% move from the current price. A scenario is envisioned where gold briefly pulls back below the prior high before continuing its ascent into the end of the decade. The $6,000 target remains a distinct possibility, potentially reached before the end of the decade, even with a 30% correction in 2026.

The Broader Macroeconomic Context

The speaker emphasizes that long-term charts demonstrate a bullish outlook for gold due to the continuous printing of US dollars, driving up asset prices. The current environment, where metals are outperforming struggling asset classes like crypto and even stocks, justifies a position in gold.

Cryptocurrency and the Relative Shift in Investment

A significant argument is made for a relative shift in investment away from speculative assets like cryptocurrencies and towards “hard assets” like gold and silver. The Total3 (total cryptocurrency market cap) divided by gold is falling, nearing 2022 lows, and is at new lows when valued in silver. This indicates a loss of confidence in crypto relative to precious metals. The speaker has consistently advised pivoting away from altcoins for the past four years, and believes the current environment reinforces this advice.

The Altcoin Market: Avoiding the FOMO Trap

The speaker cautions against the “fear of missing out” (FOMO) on a potential altcoin rally. Social interest in crypto has been trending down for the past 6-12 months, contrary to the pattern preceding previous alt seasons (where social interest trended up for 6-12 months). He warns against attempting to time the bottom of a trend, noting that altcoins have consistently dropped against silver in recent months, even when it seemed like they couldn’t fall further.

Historical Parallels and Investor Behavior

The speaker highlights a common investor mistake: believing they can accurately time the end of a trend. He uses a hypothetical chart to illustrate how investors often miss opportunities by repeatedly selling during dips and buying during peaks. He emphasizes that momentum is a powerful force in markets and can continue longer than expected.

Gold’s Impact on Risk Assets: A Potential Correction

A key argument is that a correction in gold is likely to lead to a more significant correction in risk assets (stocks, crypto). Historical examples, such as the 1973 gold rally and the subsequent 50% drop in the stock market, are cited. The speaker believes that Bitcoin has masked the weakness of altcoins for years, and that once the stock market experiences a serious correction, Bitcoin will likely continue to underperform. Gold has already outperformed stocks since 2021, with the S&P 500 down 44% against gold over the past four to five years.

The Current Market Regime and Future Outlook

The speaker posits that we are currently in a regime where crypto bleeds against metals, regardless of whether metals are rising or falling. This cycle is expected to continue until risk assets truly find a bottom. He anticipates that the S&P 500 will break down against gold, fundamentally altering market correlations. He concludes that while gold may approach a local top in the first half of 2026, it remains a strong investment, and a potential correction should be viewed as a buying opportunity.

Notable Quote:

“The thing that I really struggle to understand is why there are so many people that sort of led like their thoughts were completely incorrect on the altcoin market for the last four years… But yet they will sort of speak in a way in a very confident way to say that all right yeah now is a bad time to pivot to metals.”

Conclusion:

The analysis presents a bullish long-term outlook for gold, supported by historical patterns, macroeconomic factors, and relative performance against other asset classes. While acknowledging the potential for short-term corrections, the speaker emphasizes the importance of understanding the broader market dynamics and avoiding common investor pitfalls. The core message is to respect the current bull market in gold, be wary of overreliance on indicators like the monthly RSI, and recognize the potential for a significant shift in investment towards hard assets as economic conditions evolve.