Gold is one of the world’s oldest speculative assets and a perennial safe haven when markets feel frothy.
For decades, the gold market has moved under quiet constraint. Historically, rallies would pull back before they became significant. A kind of invisible hand ensuring moderation. This stability wasn’t accidental: A quiet gold market, even at higher levels, preserves faith in the currency regime, particularly the U.S. dollar.
Gold’s recent price action, therefore, suggests that balance might be broken, and suddenly, gold is the new black.
Deal-making is roaring back. Stock indices continue to reach new highs. And Google searches for “stock market bubble” have surged to highs last seen during the post-Covid liquidity boom. So, it’s little wonder gold has returned to the front of mind.
What’s interesting this time is the scale and speed of price action, and the breadth of attention the precious metal is commanding.
Before last week’s correction, gold and silver had just posted their strongest rally in over 40 years. Gold was up nearly 70% year-to-date, far outpacing the S&P 500, while ten weeks of consecutive inflows marked the heaviest on record. The trade has become crowded.
One catalyst behind this move dates to 2022, when the U.S. and its allies froze portions of Russia’s reserves. A wake-up call for central banks. This prompted a rethink of foreign-exchange security and spurred a steady, structural bid for gold. Central banks, led by China, have since maintained near-record purchases.
Retail investors are also starting to line up; literally. In Sydney, bullion shops have seen queues stretch down the street during price surges. The appeal is easy to grasp. Nothing feels safer than metal you can hold. But between the queues, the 8% spreads, and the storage hassles, it’s hardly efficient. ETFs and futures offer the same exposure with a few clicks. That investors are still choosing the hard way might suggest something deeper; that Wall St. paranoia has entered Main St.
Gold has again become a fascinating geopolitical barometer. But does the bull case still hold? The path of least resistance appears upward, supported by strong fundamentals and momentum flows. Key trends driving this include fiscal slippage, the risk of inflation expectations becoming unanchored, and continued diversification by central banks and investors. And material catalysts to reverse these trends appear improbable, at least in the near-term.
That said, gold works best as a risk-management tool, not a runaway bet. Rebalancing, trimming after strong runs, adding after pullbacks, helps preserve its role as a portfolio stabiliser rather than a speculative swing.
And context still matters. Gold can be volatile. It was the best-performing major asset in the 1970s, but also one of the most volatile. The same duality applies today. Last week’s 5.7% one-day drop was its sharpest since 2013.
Gold’s contemporary resurgence, then, feels less like speculation and more like a recalibration of trust in money and the global order. And right now, with markets awash with liquidity and anxiety in equal measure, gold is the new black. Timeless and quietly telling us something about the mood of the moment.
From the desk of IGB
Source post: Blackbull Research - Substack