Two Important Charts For Gold!

Gold Market Analysis: A Deep Dive into Recent Trends & Potential Future Movements

Key Concepts:

• Gold/S&P 500 Ratio: Comparing gold’s performance against the S&P 500 index to assess relative strength.
• Gold/M2 Ratio: Analyzing gold’s value relative to the money supply (M2) as an indicator of its intrinsic value and potential for appreciation.
• Backtesting: A trading/analysis technique where a strategy is applied to historical data to see how it would have performed.
• Sweep of the High: A technical analysis pattern where price briefly exceeds a previous high before potentially reversing, often signaling continuation of the trend.
• Metal Mania: A period of increased investor interest and price appreciation in precious metals.
• M2 Money Supply: A broad measure of the money supply in an economy, including cash, checking deposits, and easily convertible near money.

I. Gold’s All-Time High & Shifting Market Dynamics

The speaker notes gold has recently achieved a new all-time high and reiterates a previously stated bullish outlook, referencing a 2019-2020 prediction of gold reaching $6,000 over the next 6-9 years. Currently, with approximately six years passed, this prediction remains on track. The focus isn’t solely on the USD price of gold, but rather its performance relative to other assets, specifically the S&P 500 and the broader money supply.

II. Gold vs. S&P 500: A Breakdown in Correlation

The primary argument centers around the weakening correlation between gold and the S&P 500. While the S&P 500 has risen 44% since its 2022 low (even for those who bought at the peak), gold has significantly outperformed it. Specifically, the S&P 500 is down nearly 50% against gold over the same period. This means that an investment in gold since 2022 would have yielded a substantially higher return than an investment in the S&P 500, despite the stock market’s overall gains.

This divergence is illustrated by the Gold/S&P 500 ratio, which is experiencing a breakout. The speaker draws parallels to similar patterns observed in Bitcoin dominance (breaking through resistance, backtesting, and continuing upward) and the Hang Seng Index (HSI) and Palladium, emphasizing that these breakouts often lead to sustained upward momentum after a period of consolidation or backtesting. The speaker acknowledges the Fed’s previous intervention in 2020, which temporarily suppressed gold’s rise through monetary printing, but suggests current conditions are different.

III. Gold vs. Money Supply (M2): A Significant Signal

The second key chart highlighted is the Gold/M2 ratio. This ratio has already surpassed its 2011 highs, a historically significant level. The speaker explains that prior highs in assets like Palladium often act as resistance levels, leading to temporary pullbacks before further gains. Applying this logic to gold, a potential “sweep of the high” from August/September 1982 could signal another 20% rally, potentially pushing gold above $6,000. The speaker notes that the money supply is unlikely to remain constant, further supporting the potential for continued gold appreciation.

IV. Anticipating Market Reactions & Potential Pullbacks

The speaker anticipates a typical market reaction to gold’s recent gains: increased media attention followed by a pullback as investors take profits. However, this pullback is expected to be temporary, a “quick reversion” before gold resumes its upward trajectory against the S&P 500. The speaker cautions against solely focusing on the USD price of gold, emphasizing the importance of relative performance. He suggests that current market conditions (a potential crypto bear market) make gold a more attractive investment than either crypto or the stock market, despite acknowledging the inevitability of short-term mean reversion.

V. The “Metal Mania” & Macro Implications

The speaker describes a growing trend of investor interest in precious metals, termed “metal mania” or the “heavy metal verse.” He argues that recognizing the changing macroeconomic landscape is crucial, and investors don’t need to have held metals for years to benefit from the current gains. The recent movement in metals is significant enough to influence the broader macro environment, shifting the focus away from altcoins and towards precious metals.

Notable Quotes:

• “The S&P has gone up a lot… but the S&P is down almost 50% against gold over that period of time. That might seem weird to a lot of people.”
• “It’s easy to laugh at things like gold and silver, but there are times for them.”
• “All you had to do was recognize that the macro was turning… you could have captured all these gains without just sitting around twiddling your thumbs for 10 or 15 years.”

VI. Conclusion & Actionable Insights

The speaker remains bullish on gold, citing the Gold/S&P 500 and Gold/M2 ratios as key indicators. He anticipates potential short-term pullbacks but believes the long-term trend favors continued gold appreciation, potentially reaching $6,000 and beyond. The core takeaway is the importance of understanding relative performance and recognizing shifts in the macroeconomic environment. Diversification into metals, while not a guaranteed success, has proven beneficial in recent months, particularly for portfolios underperforming in other asset classes. The speaker encourages viewers to monitor the highlighted charts and consider the potential for further gains in the precious metals market.