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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Gold continues to see a pullback off of the recent highs. Historically, when silver hits a euphoric top, which is arguably what just happened, right? When when silver hits a euphoric top, gold then gets a pullback. And and that's essentially what's happening right now. Now, the silver pullback so far from the highs is about 37%. Gold from the highs is only about 13%.
Now, one of the things that we spoke about about a couple of weeks ago was that it would be a wise idea to consider moving some silver over to gold. And this was back, you know, while silver was still in the parabolic rally up. And the reason we said that was because if you look at the gold silver ratio, it tends to bottom out around the level that it hit. Right? If you if you look at the level that it it tagged, you can see that this ratio also tagged that same level in 1987 and in 1998 and in 2006. So when this happens, usually one of the things to consider doing is to elect to focus more on the blue chip gold for a while because historically when it hits those lows, it then tends to go back up for a while.
So if you look at say, you know, 1987 after it tagged that low, the ratio trended up for 46 months. I mean, basically four years. If you look at it when it hit it in 1998, it trended up for 64 months. So about a little over five years. And then if you look at it when it hit it in 2006, it trended up for about 30 months. So about two and a half years. And of course, it went below it in 2011. And from there, it trended up for about 107 months. Right?
So the point here is to say that a lot of times, like it it makes sense in my in my thinking, though, and we talked about this a few weeks ago as well, is that silver is likely going to underperform gold for the rest of the year, at least right? At least. There are scenarios, believe it or not, right? There are scenarios where gold could put in a new all-time high later this year, but that doesn't mean that silver will. And in fact, if you made me guess as to how this would play out, I would say gold will likely hit a new all-time high well before silver does. So, that is a consideration to make.
Now, I did this same video like a week ago, but I'm just kind of doing it because I've been talking more about crypto because the market's been dropping and I just want to provide some, you know, some perspective there. But when, and I'll just sort of go through the same thing I went through. If you look at silver back in 1973, what you'll notice is that silver, when silver topped, right? When silver topped in February, gold ended up going higher by the end of the year, right? In December. You see that? You see how silver topped and it dropped and then it just kind of bounced around and then eventually gold topped and went down. What's interesting about that is that when gold went down, silver kind of held the same lows that it had already been holding and then that's when the gold silver ratio flipped back. But what you'll notice is that gold topped second, silver topped first, and then after gold capitulated, silver then started to move back up.
Now, if you look at 2011, you'll see something similar where silver topped in April, but gold did not top until September. And so, I think it's reasonable to suggest that gold still could very well have an all-time high ahead of it this year, but I'm not sure as I'm not as confident that we could say that about silver.
Now, with silver, what's the more macro picture, right? I mean, what is the macro picture? Because what what I kind of think is going to happen, and I and I'll just sort of talk about this with gold as well. Um, what I could see happening is, you know, for silver, it's already had a blow-off top in my opinion, and and it's going to take a long time to digest that, right? It might even take a year or two, okay, if we're being honest. Uh, with gold, I don't know. I'm not as convinced that it's over. It might be. I mean, look, if it's a 2008 scenario, then okay.
But we have talked for a long time about in this larger bull market, the first bigger downturn occurring when the United States goes into a recession. If you look at the bull run in the '70s, you can see that gold had a pullback of about 50% and then it still rallied another 800% after that. And and and sort of the the turning point was the US recession in 1974. And then in the in the next bull market, it had a pullback of about 30% and then it still rallied a couple hundred percent even after that pullback. And that was interrupted by a US recession.
Now, I'm not saying the rec the recession is necessarily here just yet. What I am saying is that when the recession happens, and I think it will, unfortunately, I think it will, I I do think that if you look at like the Treasury yield curve, look at Treasury yield spreads, when they uninvert, we get recession spread. I mean, that's what the history tells us. So, we are likely going to have one. It's just a matter of when exactly is it. I think when it happens, gold will also get hit, too. But I think there's a really high probability that gold will get to all-time highs before stocks. I I think that's probably what's going to happen.
So, and you've already seen that if you've been looking at the markets back in April, stocks had a 20% drop. Gold, on the other hand, you wouldn't even notice the drop on the monthly. You can't even see it. If you go to the daily, you can kind of see it, right? Like you you can kind of see the uh the April drop where gold essentially dropped like 10% while stocks dropped 20% but it got up, you know, it got back up near the highs very, very quickly. And if you go back and look at what happened with gold in say, you know, 1973 when it finally did have a drop, or sorry, excuse me, 1975, you can see gold topped out here in 1975. Gold was back at all-time highs by 1978. But furthermore, after it hit those new all-time highs, by 1980, it was up another 345% from the high.
Now, if you were to overlay the S&P 500 onto that chart, what you'll notice is that when the S&P topped out, it topped out a lot earlier than gold did, right? Gold continued to rally even after the S&P topped out. The problem is that it took the S&P 500 until 1980 to hit a new all-time high. Till 1980, gold hit a new all-time high in 1978, despite the fact that it topped two years after the S&P topped. So, like that's uh it's kind of remarkable. Not only did gold eventually get to all-time highs before the S&P, but it also topped out a couple years after the S&P did.
So, I'm I'm wondering, you know, is there a scenario where gold continues to consolidate, waits for the bull market support band to catch up, maybe even goes below it, right? I mean, like, it could it could do something like this where it it sort of wicks below and then comes back up and maybe puts in a new all-time high before then going down. And perhaps it'll top out a lot, you know, later after after the S&P tops out. I I've kind of said recently that I think the S&P is going into about a 10 to 15% correction, right? Um, at the current time.
So, I I just wanted to sort of reiterate that idea and that, you know, silver has kind of had its run. That doesn't mean like, you know, if you if you're sitting on it and and you're down 40%. I'm not asking you to go like panic sell. I mean, there's a good chance that this just plays out like 1973 where it has a 40 to 50% draw down and then just kind of hangs out there for a couple years before trending back up.
On a more macro scale for silver, what I could see happening is something like this where it eventually kind of like, and and maybe maybe it even gets a run back up, you know, up to 100 or something, uh, sometime this year. Uh, it's kind of hard drawing it on sort of the macro scale. So, let me let me try this again. Um, if you look at it like this, like I I could see a scenario where, you know, it has this drop and then it rallies back up and it kind of comes back down and then goes back up later on on a more macro scale where it basically like retests where it broke out from. You see that? So, I think there's a good case to be made that that's how it will play out. And so where I might get interested in buying silver again would be down here.
Now, I'm not saying I don't own silver. I do. But I think it's relevant to consider that gold might outperform it, right? And and that was why I I suggested, you know, potentially making that trade for anyone interested. And and days like today are are obviously why. I mean, look at gold down 2%, silver's down 13%. So, I would I would say for the rest of the year and probably good part of next year, gold's going to be a better play than silver. Not to say that gold can't go down, it's just that it likely won't go down as much as silver. And there's a good chance, not a 100% chance, right? I'm not suggesting that. I would say maybe about a 60 to 65% chance in my view that gold could actually hit a new all-time high. If it doesn't hit a new all-time high, it could be because of some type of like, you know, 2008 scenario where everything just goes to hell and there's really nowhere to hide.
And the reason why I compare the 2008 move and the 1973 move to today is because when you look at the S&P divided by gold, there's only two times in history where it broke down from the levels that it's breaking down from right now. The relative valuation of the S&P 500 against gold, and that is in 2008 and 1973. So those are the reasons I I look at those two.
So in in the in the short term and and for metals, the short term is a year. Okay? So get off my back. This is not a a five-minute chart. This is not crypto. Uh, this is this is a longer term thing. In this case, what I think is silver is in a much more longer drawn-out pullback consolidation phase before it's going to have any real test of moving back up near the highs. And that next test of the highs could be a long ways off, right? I mean, it could be a few years for all we know. I could see silver consolidating, you know, around the prior highs at some point for a little while.
But the way I would play it is this. You know, if you do convert silver to gold, I mean, I I've been saying it for weeks, right? But if you do, remember that gold can still go down, but it gives you exposure to the upside. So, it's a way to sort of sit into the same narrative that you're already sitting in, but it gives you potential upside. Whereas silver, it gives you the upside if gold goes up, but the the downside risk is a lot higher because it already had this blow-off top parabolic rally.
I don't want to suggest that I know for a fact that silver has topped. Like there are scenarios, I'm sure, where it could go back up, but I think like base case right now what I would say, I would probably say about a 75% chance that silver has topped for the year. But then I would say maybe about a 35% chance that gold has topped for the year. And if gold has topped and it doesn't get another rally back up, then silver would still go down a lot more than gold. Which is why I think gold is a better play than silver for now. That doesn't mean it can't all go to hell if a US recession hits, but if a US recession hits, usually metals hold up a lot better than stocks, and they usually recover to all-time highs a lot quicker than stocks, too. So, just something to keep in mind.
Um, so those are my views, right? Those are my views about gold. And and and really if you go look at at say like the the year-to-date ROI of um of metals, like if you look at the year-to-date ROI of gold in 2026, and then you compare it to say 2022 and 2018, 2014, I think there's a good chance you might have a low like late Q3, early Q4. That could be another opportunity on gold. Um, just something to keep in mind.
But yeah, I mean, those are my thoughts. Uh, let me know what you guys think in the comments below. Again, you guys can check out the website benjaminc.com. Uh, if you want to check out ITC Premium, you can. We actually talk a lot about crypto, metals, stocks recently. You know, we've talked a lot more about about, you know, energy manufacturing things that have been really doing well. Um, and we've we've talked about doing well before. They were obviously doing well to everyone else. So, check that out. If you want 50% off your first month, you can use the code ITC50. Uh, links in the description below. Thank you guys for tuning in. Subscribe and I'll see you guys next time. Bye.