Is Gold Unstoppable?

Tl;dr Dig deeper if you're trading gold right now. There are key things to consider to make informed decisions. A pullback is more likely than a simple continuous race up.

Gold (obviously) has gone parabolic.

It's seen as a hedge against inflation, stagflation, recession, fear, policy mistakes. So, right now, it's a great time to be gold. Opinions vary about why, but the clear concensus is that everything sucks for some reason. Gold looks like a flawless long position.

Which makes a lot of people think it's a great time to short gold.

Which makes some people think that it's time to drop long positions because straddles and strangles are a better way to play it (I may be one of them).

I'm not going to tell anyone what to do. That's not my thing and I have no idea what I'm doing but I would like to point out these things for consideration:

1. Gold RSI has gone wildly overbought on the 2h, Day, Week and Month charts. Things can stay overbought for a long time but it's good to understand that this trade is EXTREMELY crowded (which shows you just how much fear is in the market). Any trade, even the best of the best, requires buyers with money to sustain. Neither of those things are infinite.

2. RSI on 1m, 5m, 30m, 1h has dropped from oversold. That is a broad momentum shift over several time periods. It's worth noting. Is that a short term buyer exhaustion before another round of ripping up? Is it a sign of a shift in momentum that will take gold down under $300? The market will let us know in a little bit.

3. The Dollar Effect. The fearless Orange leader of the US economy made America's dollar great by causing it to drop by 10%+ during his first term of four years. Not to be outdone by himself, this time he's made it drop 10%+ in only four months. Why does it matter?

Gold is priced in dollars globally. When the dollar weakens, foreign buyers can buy gold more cheaply, increasing demand. (the dollar also has an effect on the stock market - but that's another story).

1. BTC is ripping up. Bitcoin has been long debated as a suitable hedge against a lot of things. Some people call it digital gold. It's also traded in US dollars so drops in US dollar value (say 10% in 4 months) will make it rise. It's also held by a lot of tech and speculative investors. So, when the QQQ drops and BTC surges, it makes a case for people using it as a hedge. And that is what just happened.

So what does this have to do with Gold? Well, something else just happened.

If you check the BTC/GLD ratio, you can see that it just spiked up. Buyers have started to favor BTC over GLD as of the last two days.

Likely, that is because GLD is overcrowded as a trade so people are paking there money elsewhere. People can't just keep buying gold forever. They're hunting for different ideas - bonds suck, equities suck, gold is crowded, so bitcoin it is. This could be seen as a signal that gold is topping because it's losing buyers to "digital gold".

1. Historical context. I've been seeing a lot of goofy posts where someone is pulling out a chart from 46 years ago to suggest that we're following the same path - just because they say so.

Ultimately, (like everything else right now) which example from history makes the most sense will boil down to your view of the economy. Gold does well in stagflation, inflation, recession or a slow crash. But not so great in a crisis liquidity event (but then it recovers).

So here's a quick history lesson so you can have context (courtesy of ChatGPT summary):

1. 1970s Gold Rush – Bretton Woods Collapse & Stagflation

Event: Nixon ends dollar-gold convertibility (1971); stagflation and oil shocks dominate the decade.

Timeline:

• 1971: Gold at $35
• 1971–1974: Rises to ~$180
• 1974–1976: Pullback to ~$100
• 1976–1980: Parabolic rise to $850

Cause and Consequence:
Gold surged due to the collapse of the Bretton Woods system, double-digit inflation, oil shocks, and lack of monetary credibility. After Volcker's rate hikes in 1980, gold crashed to ~$300 and entered a 20-year bear market.

2. 2000–2011 Bull Market – Dotcom Aftermath to Global Debt Crisis

Event: Begins with dotcom bust, gains steam after 9/11, and accelerates post-2008 during QE and sovereign debt fears.

Timeline:

• 2000: Bottoms at ~$250
• 2001–2006: Gradual rise to ~$700
• 2008: Falls from ~$1,000 to ~$700
• 2009–2011: Surges to $1,920

Cause and Consequence:
Driven by global instability, loose monetary policy, and debt concerns, gold peaked in 2011 amid the U.S. debt ceiling crisis and Eurozone turmoil. It then corrected to ~$1,050 by 2015 as real rates normalized and the dollar strengthened.

3. 2008 Financial Crisis – Crash Then Rally

Event: Global liquidity panic followed by extreme monetary intervention.

Timeline:

• Early 2008: Nears $1,000
• Late 2008: Drops to ~$700
• 2009–2011: Rallies back to $1,920

Cause and Consequence:
Initially sold off in the liquidity crunch, gold later surged as the Fed launched QE and drove real rates negative. After peaking in 2011, gold entered a multiyear decline as deflation risks faded and the dollar recovered.

4. 2020 Pandemic Rally – QE Infinity and Fiat Debasement Fears

Event: COVID crash, global lockdowns, and record stimulus.

Timeline:

• Feb–Mar 2020: Drops from ~$1,700 to ~$1,450
• Mar–Aug 2020: Rallies to $2,070
• 2021–2022: Pullback to ~$1,700
• 2023–2024: Resumes rise toward ~$2,400

Cause and Consequence:
Gold fell briefly in the March 2020 panic, then rallied on unprecedented global stimulus, zero interest rates, and debasement fears. It consolidated in 2021–2022 before resuming its uptrend amid persistent inflation and central bank accumulation.