Transcription
Hey everyone, and thanks for jumping back into the heavy metal verse. Today, we're going to talk about gold, dubious speculation.
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I did want to mention, I did publish a new report, uh, in case you missed it, just a couple of days ago, or really yesterday. And if you want to go read it, we talk a lot about gold and silver and stocks, and and even crypto in the report. So, make sure you guys check that out. Link is in the description below. You can just scroll down and read it, or you can put in your email if you want to get the PDF to your inbox.
Let's go ahead and jump in here. So, gold is trading back below 5,000. And a lot of times, what happens in, you know, midterm years with gold, especially after a kind of a low local top here that we got in early Q1, I'm still expecting a longer consolidation phase here at the very least. There's always a chance that it ends up falling below the bull market support band, but it would seem likely that if gold is going to put in new all-time highs, it would likely do it after the bull market support band has fully caught up.
If you look at gold, you can see that for this entire bull market, for at least for the last, you know, year or two, there have been plenty of times where gold would accelerate and then it would just go sideways until the bull market support band caught up. Okay? Uh, there's plenty of examples of that. Sometimes we correct into it. Sometimes we go up and then we just simply go sideways until it catches up.
But it seems to me like we've reached a level at which point there's a lot of indecision. And when I say there's a lot of indecision, you know, you have a huge wick up, but you also have a huge wick down. So, yes, there's a lot of selling pressure up here, but there was also a lot of buying when it came down here. And it, it doesn't necessarily seem as obvious to me as, as potentially the silver top. My guess is that the top for silver is in for this year. That doesn't mean it won't go higher next year, or, you know, maybe a year or two after that, but it seems likely that the top for silver is in for a while.
But there's a chance that gold could continue to go higher. These, the, the, the candles of gold don't look as bearish to me as the ones for silver. And with silver, a lot of times, when you do get a big drop like this, it eventually comes with a counter-trend rally at some point. Um, even if, you know, even if we're in something like '06, where you have this big drop, you'll see back then, silver also had a nice rally up, and then it had a, a pretty big drop down about 40%. We eventually got a counter-trend rally, but notice the high was in '06. Silver didn't go put in a new all-time high until 2007. And then eventually it went even higher. We had the recession, and then ultimately went even higher.
And and that's why we talk a lot about silver's valuation against the S&P 500, right? Like, you can look at the S&P divided by gold and see that it's been breaking down. One of the things to keep in mind is like, the breakdown process can take a while, right? I mean, it can take a while. It doesn't have to happen overnight. You can see that when it actually broke down in 200, early 2008, uh, to August, I mean, it took like three-quarters of the year for it to ultimately definitively break down. Um, and then ultimately that led to the bottom in the market when, when the S&P gold valuation hit that low in that recession.
Now, in 1973, it didn't hang around nearly as long, but it still ultimately broke down. Now, if you look at the S&P divided by silver, you can see that it has more definitively kind of broken down from these levels. Now, it's had a big bounce back up, but a lot of times, when you get a move like this and you get a big bounce back up, if this is the low for a while, um, not going to edit it out, right? It would still likely get a pullback down here again before then maybe going back up for a while and then potentially dropping later on. I mean, if you look at this, you know, sort of this level, uh, the S&P valuation that it just hit against silver, you can see that we also broke. We were at this level in 2009. Um, and we also broke below these levels way back over here, right, in the 1970s, and it, and it broke down a lot.
But a lot of times, when, when this thing breaks down very aggressively like it, like it has been, it usually does lead to weakness in the stock market. Like, it's usually not a good thing when it gets this aggressive of a drop. And that might explain partially, like, why equities like the S&P just hasn't really moved in a while. I, I know technically, and being technically correct is the best way to be correct. Technically speaking, the S&P 500 is in striking distance of all-time highs. In fact, it just hit all-time highs, you know, just a few weeks ago. But the reality is that it's also, it also hasn't really made any progress for a while, right? You could argue that the S&P has barely gone higher since October. If you look at how high it went over here in October, the S&P has only gone like 1% higher.
And it does start to remind me of what happened with Bitcoin, where Bitcoin started to stall out for a long time, and then after stalling out for a while, eventually it, it went into a bear market because these are distribution phases where, doesn't mean you can't go higher. It just means that, you know, price is really struggling to break out, and when that happens, buyers eventually get exhausted, and then the sellers sort of take over for a while. So, I wonder if we're going to start to see what we saw with Bitcoin, but on the S&P chart, because to me, it's, it's seeming like these are, these buyers are starting to get exhausted over here, as there hasn't really been a lot of progress made.
And when you look at the year-to-date ROI of the S&P 500, if you look at say, the average, um, in midterm years, and then compare it to 2026, I mean, you know, there can be resilience into March, but usually by the time you get out into the summer and Q3, there's a lot more apparent weakness in the stock market. So, I, I do believe there's a good chance that the weakness in the stock market is becoming more evident, as to me, this is really looking more like a distribution phase up here locally. And part of that is justified by looking at the S&P divided by gold, because historically, great things do not happen for the S&P when it starts breaking down, um, against gold from these levels. You can see the same thing happened in '08 and also in 1973. It just hasn't really been a great area for stocks to break down against gold.
And if you think about it, stocks really haven't progressed that much since they broke down, since, since stocks broke down against gold. And what's really interesting is if you look at, you know, the QQQ, it hasn't even made all-time highs since October. And this is something we also saw in 2021 and 2022, where the, where the QQQ topped in November, and it was a lower high in December, and then we went below the bull market support band, and then it led into the weakness that we saw until October. What if the same thing's happening, right? What if you have the, the high in 2025, and then a lower high in 2026, and then you start to see that weakness?
Yes, the Dow Jones put in a new all-time high, but so what? It also was putting in higher highs after the NASDAQ did last cycle as well, back in 2021, 2022. Right? The NASDAQ back then was pushing higher, had a higher high from November to December and January. So, a higher high from November to January, while the QQQ had a lower high. And now you're seeing the same thing today, right? The Dow Jones is having a higher high, but the QQQ is seeing a lower high. So, you're already seeing the weakness in stocks. And that weakness historically has presented itself when the S&P breaks down against gold. So, I just don't think this time is going to be any different.
And so because of that, I mean, structurally, long-term, even if gold does get a correction, which, you know, it has been getting, it's probably not a worse place to be than stocks for the next couple of years, you know, I mean, like, not financial advice, but it, it really isn't. And you can, you can see that's been played out on the chart for years now. We've talked about why precious, why precious metals, um, have been a great addition to the portfolio as, as a nice hedge against risk-off times.
And so when you look at prior gold uptrends, you'll notice that two of the last secular bull markets in gold, the one over here in the '60s, '70s, and '80s, and the one that started over here in, um, you know, 1999 and lasted through 2011. You'll notice that in both of them, there was a US recession in the middle of the bull market, and it led to a deep correction in gold. One of those corrections was 50%. The one in '08 was 35%. They suck, but guess what? It took stocks a longer time to get to all-time highs than gold, right? So, if you look at where stocks topped out in 1973, they didn't end up making a new high until 1980. Gold found a top in 1975 or 1974, somewhere over here. They were back at new all-time highs, just a few years later, 1978. So, it took a lot less time to get back to all-time highs.
And then if you look at the 2000s, you'll see that gold topped in March and was back at new all-time highs by September of '09, October of '09. Stocks topped in October of '07. They topped before gold, but they still didn't reach all-time highs for like six years, 2013. So, we already saw this, by the way, earlier this year in the April crash, right? Remember when, when stocks dropped a lot in April? Gold barely dropped. So, if there is a US recession, like gold would likely drop. And that's like, to, to me, the way I justify having it as a component of a long-term portfolio, I was like, so what, you know, so what? I don't just want to sit in cash forever. Obviously, I have a cash position because I think we're going into some risk-off times for a little bit. We already are there with crypto. Um, but, you know, if and when gold gets the correction, there's a good chance that it would then recover out of it well sooner than the stock market. And that's just what history shows.
Now, is there a chance that we're looking at a more secular top by gold, like 2011 or 1980? It's possible. But one of the things I ask myself is, over the next several years, are they more likely to try to solve our issues by printing, which I think they will, which is probably a tailwind for gold? And then also, I have to ask myself, are we heading towards more or less uncertainty over the next few years? And my guess is that we are unfortunately heading towards more uncertainty over the next few years. And so because of that, while I will fully admit, you know, we likely will have a, a sizable correction in metals, we already have had one in silver, um, that doesn't mean it's a worse place to be, right, than, than stocks. Um, and yes, I mean, we can, we can look at the RSI and, and see how overbought things are, but the reality is is people have been screaming it's overbought since, you know, May of 2024, when s, when gold was at like 2,300. You know, I mean, these, these charts can stay like this far longer than most people think they can, especially for metals. When you have a base that takes this long to build up, you know, you can stay over, I mean, if you can stay down here for long periods of time, you can also stay up here for long periods of time.
So, I'm still a macro bull on gold long-term. I accept there's going to be corrections. I accept that. But again, you have to look at, like, what are you comparing to? If you're comparing to the S&P, stocks are bleeding to the S&P. Even with the silver correction recently, stocks have been selling off to silver. Um, and I mean, they're, they're up recently against silver because of the silver correction, but guess what? They're still lower now than where they were basically at any point in 2025, right? So, you know, and, and this, the thing is that these trends can go on far longer than, than most people think they can.
So, those are my thoughts on gold. Hopefully, that's been helpful to you. Again, if you want to read more about my, my thoughts on, on metals in general, uh, we did publish a macro risk memo where we talk about, like, what's going on and how we're seeing, um, the, the relative flight to safety as we go down the risk curve. And I just want you guys to be aware that this is, is, uh, over here on the website, and we just published it. It is kind of long, I will warn you. But if you're looking for a read and you want to better understand what's going on in the markets, I would encourage it, and you can find it at benjaminc.com. Thank you guys for tuning in. Subscribe, give the video a thumbs up, and I'll see you next time. Bye.