Gold's Next Cycle Won't Need a Falling Dollar to Succeed: Gareth Soloway

Key Concepts

• Risk Asset Behavior: The phenomenon where gold currently trades in correlation with stock market volatility rather than as a traditional safe haven.
• Weak Hands: A trading term for investors who lack the conviction or capital to hold an asset through volatility, leading to forced liquidations.
• Bear Flag Formation: A technical chart pattern indicating a period of consolidation within a downtrend, often signaling a continuation of the downward move.
• De-dollarization: The long-term global trend of nations reducing reliance on the U.S. Dollar as a reserve currency.
• Debasement Trade: The investment thesis that gold will rise as governments print money and increase deficits, eroding the purchasing power of fiat currencies.
• Phoenix Effect: The tendency for an asset to sell off sharply during a liquidity crisis before rebounding aggressively as investors return to it for safety.

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1. Market Overview and Gold Price Action

Gold experienced extreme volatility, plunging toward $4,100 per ounce before rebounding to the $4,450 level. This movement was triggered by geopolitical tensions involving Iran and subsequent diplomatic efforts. Gareth Soloway, Chief Market Strategist at Verified Investing, maintains a bearish outlook for the near term, targeting $3,500 by year-end. He argues that gold is currently being treated as a "risk asset," meaning it must undergo a "washout" of speculative investors before it can resume its long-term upward trajectory.

2. Technical Analysis and Frameworks

Soloway utilizes specific technical levels to navigate the current volatility:

• Gold: The $4,300–$4,400 zone is critical. A daily close below this range confirms the path toward $3,500. Conversely, a move above $5,400 would invalidate his bearish thesis.
• Silver: Currently viewed as more oversold than gold. Soloway identifies a "bear flag" pattern and targets a downside of $50–$54. He notes that silver needs to break above $93 to shift back into bullish momentum.
• Miners (GDX): Soloway has taken a tactical long position on GDX, anticipating a swing trade bounce toward $94, despite a broader downtrend. He suggests "legging in" (buying in smaller increments) to mitigate the risk of trying to time the exact bottom.

3. Macroeconomic Drivers

• Oil and Inflation: Oil prices are viewed as a topping market. Soloway argues that the U.S. administration is incentivized to lower oil prices to mitigate inflation ahead of midterms. High oil prices are currently fueling inflation, which puts upward pressure on yields.
• Yields and Private Credit: The U.S. 10-year yield has risen significantly, acting as a "50 basis point rate hike" equivalent, which is placing immense stress on the $2 trillion private credit market. Soloway draws parallels to the 2008 financial crisis, where credit issues and oil volatility coincided.
• The Bond Market: Soloway suggests that the bond market is currently dictating government policy, forcing political leaders to backtrack on aggressive rhetoric (such as tariffs or war escalation) when yields approach 4.5%.

4. The "Debasement" Thesis

Despite the short-term bearish outlook, Soloway remains a long-term bull on gold. He argues that the "debasement trade"—driven by explosive U.S. deficits and global distrust in the dollar—is the primary driver for gold’s future. He believes that once the "weak hands" are flushed out and the Federal Reserve is forced to lower rates due to economic weakness, gold will likely return to all-time highs and potentially reach $10,000 within a few years.

5. Bitcoin and Portfolio Strategy

Soloway views Bitcoin as a tactical opportunity with more near-term upside potential than gold or silver, targeting $80,000–$85,000. However, he warns that if the S&P 500 drops to 5,600 by year-end, Bitcoin will likely face another leg down.

Key Advice for Investors:

• Know your time horizon: Long-term investors should ignore short-term volatility and focus on the macro narrative (de-dollarization).
• Avoid emotional decisions: The market is designed to push investors to their limits; avoid selling during "free falls" if your thesis remains intact.
• Leg in: Use a strategy of building positions over time rather than attempting to catch the absolute bottom.

Synthesis

The current market environment is characterized by a "change in character" where traditional safe havens like gold are behaving like risk assets due to speculative over-participation. While geopolitical news causes violent short-term price swings, the underlying structural issues—specifically U.S. fiscal deficits and private credit stress—point toward a necessary "washout" of speculative capital. Once this liquidation is complete, the long-term debasement of fiat currency is expected to drive gold and other hard assets to significantly higher levels.