Gold: Dubious Speculation

The speaker begins by noting gold's current trading price around $47-$4,800, following a significant drop of just under 30%. This correction occurred after gold had previously fallen below its 20-week and 21-week Exponential Moving Averages (EMAs) but has since recovered above them. The speaker aims to discuss their long-term outlook for gold and what the remainder of the current year might hold. Looking back at historical gold bull markets, the speaker observes a recurring pattern where recessions in the United States have interrupted these cycles. Examples include the mid-1970s recession during the late 60s/70s bull run and the 2008 recession during the 2001-2011 bull market. Given the current macroeconomic environment and increasing geopolitical uncertainty, the speaker believes gold will remain structurally bullish through the end of the decade. However, they acknowledge that periods of correction, like the one just experienced, can cause uncertainty about the market's direction. The speaker contrasts the recent drop with previous significant movements in gold. They mention that gold experienced a notable rally from 2023 to 2026 and a local top in early 2022, suggesting the recent early 2026 top might be similar to the 2022 event. In 2022, gold saw a sell-off, but it wasn't a major disruption to the overall bull market. The speaker also draws parallels to the lead-up to the 2008 drop, which also followed an impressive rally. While convinced that gold will eventually reach higher prices later in the decade, the speaker finds it difficult to definitively categorize the recent drop as being more akin to the 2006 correction or the more severe 2008 decline. They do not believe the current situation is comparable to the 2011 macro top that lasted for two decades, suggesting that if this is a local top, it will be temporary. The speaker discusses technical indicators, specifically the Relative Strength Index (RSI) on a monthly chart. They note that the RSI was elevated leading into early 2026, which some interpret as a sign of a major top. However, the speaker points out that in 1973, gold also hit a monthly RSI of around 95. After a brief correction, gold rallied into a recession and then experienced another pullback before a subsequent move higher. This historical example suggests that a high RSI doesn't necessarily mark the end of a bull market, as the 1973 correction was only a few months long and around 27-28%, similar in magnitude to the recent drop. Another key comparison is made using the valuation of gold against the S&P 500. The speaker analyzes the ratio of gold to the S&P 500, noting a pattern similar to the 1970s. Gold broke through resistance against the stock market in 1973, experienced a roughly 27% drop, and then rallied to new highs. A similar pattern was observed in 2008, although the drop was deeper (around 34%), with the 2006 correction being closer to 25%. The speaker emphasizes that these drops, while feeling significant, were relatively shallow in the context of the broader bull markets. The speaker addresses the concern about gold falling below the 20-week moving average, explaining that this is not uncommon in bull markets and doesn't necessarily signal the end of the upward trend. They highlight the 20-month simple moving average and 21-month EMA as a more robust "gold bull market support band." This band was only breached once during the 2000s bull market and briefly in 1975. Currently, this support band is much lower, around $3,600-$3,700, indicating significant room for price movement before structural support is threatened. This reinforces the speaker's view that gold remains structurally bullish. Even if their primary bullish thesis is incorrect, the speaker expresses confidence in gold's ability to outperform the S&P 500, citing the historical outperformance and the ongoing geopolitical uncertainty. They recall a period in February 2025 where the stock market experienced a 20% drop, while gold showed remarkable resilience and quickly returned to all-time highs. This demonstrates a preference for hard assets over risk assets. The speaker acknowledges that gold might not immediately reach new all-time highs. There's a possibility of a holding pattern, allowing longer-term moving averages to catch up, similar to what happened in 2006. In that scenario, gold experienced a correction, a bounce, a higher low, and then consolidation before reaching new highs. However, the speaker doesn't rule out the possibility of gold hitting new all-time highs this year, drawing a parallel to 1974, where gold topped, dropped about 25%, and then reached new all-time highs by November. The speaker then shifts focus to Bitcoin, comparing its performance against gold. They argue that despite the narrative of Bitcoin outperforming, the reality, since December 2024, shows Bitcoin down against gold by about 60%. Bitcoin has been testing bearish resistance bands against gold, similar to its performance in 2022, 2018, and 2014. The speaker doubts Bitcoin will outperform gold for the rest of the year, suggesting gold is more likely to outperform. They propose that Bitcoin might enter an "oscillator status" against gold, with a potential market cycle bottom for Bitcoin coinciding with its price falling to range lows against gold. The speaker addresses a common argument that if Bitcoin didn't rise as much during its bull run, it shouldn't fall as much. They refute this by drawing parallels to the stock market in the 1960s-1980s and 2000-2008. In both cases, even if the market didn't significantly exceed previous highs before a downturn, it still experienced substantial drops. The speaker argues that not going up as much is not a valid reason for a market not to go down; in fact, it could be interpreted as a lack of interest. They caution against this line of reasoning for Bitcoin, anticipating a major low later in the year but emphasizing that the reason for a potential downturn is not simply that it didn't rise significantly. The video concludes with a recap of the speaker's views on gold, the stock market, and Bitcoin, encouraging viewers to subscribe and check out their macro reports on benjamincowan.com.