Gold’s $4,000 Pullback Signals Opportunity, Not Reversal

Key Concepts

Commodity Market Volatility: The transcript discusses recent aggressive sell-offs in gold and associated equities, particularly on Fridays, attributed to market expectations of volatile news and a desire for investors to reduce risk exposure before the weekend.
Gold Price Correction: Gold has seen a pullback from recent highs, dropping to $4,000 an ounce from $4,300. This is described as a "healthy check back" after a "meteoric rise."
RSI Exhaustion: The weekly Relative Strength Index (RSI) for gold reached 92, an extremely high level, indicating potential exhaustion in the trade and a precursor to a pullback.
Equity Performance: Gold equities have also experienced significant pullbacks, with some large-cap names like K92 and B2Gold seeing declines of 10-20% from their peaks. However, these pullbacks are considered normal within a broader bull market context.
Seasonality: The fall season, particularly October, is historically adverse to commodity trades, with October being the most volatile month in capital markets.
Buying Opportunity: The current pullback is viewed by the speakers as a buying opportunity, especially for undervalued names with upcoming catalysts.
Q3 Reporting Season: The upcoming Q3 earnings season is highlighted as a critical catalyst for gold producers, with expectations of strong numbers due to record gold prices and the potential reactivation of buyback programs.
Share Buybacks: Companies are increasingly engaging in share buybacks as a means of returning capital to shareholders, a trend that has fueled the S&P 500 and is expected to support gold equities.
Monetary Debasement: The underlying investment case for gold remains strong due to ongoing monetary debasement and increasing government debt globally.
Psychological Levels: Key price levels, such as $4,000 for gold, are considered psychological barriers that, if broken, could trigger further volatility or a "flush" in the market.
Copper Market: Copper prices are holding strong around $5 per pound, but copper equities have seen pullbacks due to broader market weakness, presenting an opportunity.
Oil and Gas Sector: The oil and gas sector is still considered challenging, with political considerations (e.g., Trump's stance on oil prices) and secondary sanctions on Russian crude purchases being key factors.

Market Overview and Recent Volatility

The recording on October 24th, 2025, at 5:00 a.m. Eastern, precedes the market opening. The speakers note a trend of aggressive market sell-offs on Fridays leading into the weekend, a common occurrence when volatile news is anticipated. While there haven't been major news events, microeconomic and political factors are discussed as contributing to this sentiment. Investors are seeking to reduce risk exposure before the weekend, leading to a "flat" market position.

Gold and Silver Price Action

The commodity space, particularly gold and associated equities, has experienced significant pullbacks. Gold has fallen to $4,000 an ounce from a recent high of $4,300. Silver is also down, trading around $47-$48 from a high of $54.50. These movements are characterized as a "healthy check back" after a period of rapid ascent.

Historical Context and Seasonality

The speakers reference their monthly press releases, which have maintained a positive outlook throughout the year until late July/August. They note that the fall season, historically, is adverse to commodity trades, with an 8 out of 10 probability of pullbacks. October is identified as the most volatile month in capital markets.

Technical Indicators and Market Exhaustion

The weekly RSI for gold reached an exceptionally high 92, indicating potential exhaustion in the trade. This extreme reading, coupled with the price pullback, suggests the market may have "gotten ahead of itself."

Quantifying the Pullback

Despite the perceived significant drops, the pullback in gold is quantified as a modest loss. Assuming a move from $2,000 to $4,300, a $250 loss represents less than a 10% retracement of a $2,300 gain over approximately two years (since October 2023). Gold equities have seen even greater percentage drops, but this is not considered a "cataclysmic event."

Gold Equities: A Normal Correction

Specific Equity Examples

K92: Peaked around $21, pulled back to below $17, and has found a level around $18.
B2Gold: Peaked at $79, pulled back to $68.

These moves, while substantial, are not seen as disproportionate to the gold price action.

Bull Market Context

The speakers emphasize that within bull markets, it is not unusual for stocks to experience pullbacks of 33% to 66%. They believe that if the current selling pressure subsides, this period will be a "blip on the charts of history" for producers.

Strategic Outlook

The current pullback is not viewed as a reason to change investment strategy or abandon existing positions. The speakers anticipate that November could see a strong restart to the trend, particularly in producers.

The Pullback as a Buying Opportunity

Portfolio Adjustments

The speakers have been strategically trimming positions in strong-performing names, particularly on the gold side, to raise cash. Their cash position was around 10% at the end of September, positioning them to redeploy capital into undervalued names with upcoming catalysts.

Q3 Reporting Season as a Catalyst

The upcoming Q3 reporting season is identified as a key catalyst for the next leg higher in gold equities. The speakers argue that gold producers are now behaving more like large-cap companies, with pullbacks being aggressively bought and share buybacks becoming a significant driver.

Expected Q3 Results and Buybacks

Strong Numbers: Q3 saw record gold prices, leading to expectations of excellent earnings.
Buyback Reactivation: Companies typically have blackout periods for buybacks similar to insider trading restrictions. Post-earnings reporting, many large and mid-cap producers are expected to reactivate their buyback programs, especially those with active programs and significant cash flow.

Shift in Industry Behavior

The gold mining industry is seen as having "graduated" and now resembles the behavior of the S&P 500, where pullbacks are bought and buybacks are a meaningful force.

Balance Sheet Strength and Capital Returns

Many large gold companies have reduced debt and achieved comfortable debt levels. This, combined with excess cash flow, is leading to increased focus on capital returns, including dividends and buybacks. The speakers advise looking for announcements regarding capital returns, as the market is likely to react positively.

Generalist Investor Attraction

Strong earnings growth momentum, driven by higher gold prices and buybacks, is expected to attract more generalist investors to the gold sector. This influx of new money is significant for the relatively small gold market.

Future Outlook and Strategy

Potential for Further Pullback

While viewing the current situation as a buying opportunity, the speakers acknowledge the possibility of further downside. They haven't seen enough "flushing out" to confirm the correction is over and wouldn't be surprised by a bit more decline before the uptrend resumes.

Timing of Investment

The speakers plan to ramp up their investment cycle later in November, rather than deploying all available capital immediately. They have been net buyers in October and expect to continue this trend into November and December, anticipating Q1 to be the strongest seasonal period for commodities.

Tax Loss Selling

The speakers believe there will be a lack of significant tax loss selling this year, as most stocks are not significantly down from their 52-week highs. This absence of selling pressure could allow any momentum gained from Q3 reporting to carry through to the end of the year.

Unforeseen Volatility

The speakers acknowledge the inherent volatility of news flow and that unexpected events could alter their baseline expectations. They advise viewers to monitor their weekly updates for readjustments.

Psychological Levels and Market Mechanics

The absence of a significant "flush" (a day with exceptionally high volume on a down day) is noted. The speakers suggest that breaking psychological levels, such as $4,000 for gold, could trigger this flush, leading to liquidations and a subsequent market rebound. Technical analysts are watching levels like $3,970 for gold.

Selective Buying

The strategy is not to buy across the entire market but to focus on specific names that are highly liked and are "on sale." Examples include adding to positions in Belleview Gold, despite potentially mediocre Q3 results, as the long-term thesis remains intact.

Copper and Other Commodities

Copper Market Strength

Copper prices remain strong at around $5 per pound. While copper equities have seen pullbacks due to broader market weakness, the underlying commodity price is robust. The speakers are gradually increasing their copper exposure.

Oil and Gas Sector Considerations

The oil and gas sector is still viewed as challenging. Political factors, such as Trump's stance on oil prices and secondary sanctions on countries purchasing Russian crude (primarily China and India), are significant dislocators. The speakers are monitoring how these factors might impact the market, potentially serving as a catalyst for the oil and gas sector. However, they note that politicians generally do not favor high oil prices.

Conclusion and Long-Term Themes

Steady as She Goes

Despite the volatility, the core investment themes remain intact. The speakers are long gold, trimming winners, and are now net buyers of names they strongly believe in.

Debasement and Supply Tightness

The monetary debasement trade is still active, and copper supply is considered extremely tight, as demonstrated by its price performance despite weakness in copper equities.

Commodities Market Outlook

The speakers are comfortable with their current positions and are looking to take advantage of the volatility. They reiterate that "the sky isn't falling" in the commodities market.

The recording concludes with the speakers acknowledging that news events occurring after the recording could alter their perspectives. They look forward to the next week and wish viewers a good weekend.