Gold: strong story, weak price
My downside target for gold is about $3,100 an ounce if the current pattern plays out. The bull story is loud right now: people expect currencies to blow up from government printing. That is exactly the problem. Near every major top, the story sounds fresh and strong, and everyone thinks price will go higher.
I treat precious metals like an insurance plan against banks, governments, and currencies failing, the same way you insure a house. I keep some physical metal stored away for chaos, but I do not put all my money in. Metals can drop 40, 50, 60, or 70% even when every argument says they should be worth $8,000 or $10,000.
Price is what matters, not the story. I follow the direction of the 150-day moving average. There are four stages in the market. In a stage two bull market, the 150-day slopes up and the shorter moving averages sit above it - gold was there for a long time. Then comes high volatility and a sharp pullback that damages momentum. In a stage three top, the story is strongest while the internals and momentum quietly turn down. In stage four, the long-term average turns down and price and shorter averages fall below it - a bear market. Gold's 50-day moving average has already flipped from support to resistance, a sign the regime is changing. Odds are metals keep falling out of favor or drift sideways for a long time. Silver is doing the same thing. A trend is more likely to continue than to reverse.
The economic story does not save you. Years ago I lost all the money in an investment account trading on fundamentals - I owned some of the strongest companies in the world, and the tech bubble blew them up anyway.
The 2011-2013 warning
Back in 2011-2013, gold had its strongest story, and most people had just chased in. That is the stage three topping phase: great narrative, deteriorating internals. Investors thought it would go to the moon. Instead it fell 45% and took about 13 years to gain real ground again. Today looks the same - gold went from a trade to a FOMO-driven, euphoric move. Enthusiasm may be disguising exhaustion rather than confirming price. A great long-term thesis can still deliver a brutal short-term drawdown.
I got long metals in 2019 when they broke out of a base, and exited just above 5,000. Now I wait for the reset to reinvest and hold long term. A drop to $3,100 would be a financial cleansing in the metals space. It might be short-lived, even a quick spike where you either grab some or miss it before it rebounds. Have a target ready to accumulate, because long term metals still do very well.
Rising yields, forced selling, margin
Would rising rates make me more bearish on gold? Yes. If yields pop and take off, gold and silver come under heavy pressure. You can earn a good yield with no downside risk, the dollar likely keeps screaming higher, which pressures metals, and the stock market likely sells off in a big way. Selling in stocks means selling across investments in general.
The real danger is forced selling that makes everything move together. Margin in brokerage accounts is near a record level. Many brokers offer 2:1 or 3:1 leverage, so a 20% market drop turns into 40% or 60% losses. People stretch themselves and do not see the risk they carry, so when direction changes their accounts drop fast and that creates more selling. That selling pressure bleeds into margin calls and forced selling of metals, and they all sell off together. The asset meant to protect wealth in a crisis can fall right alongside stocks when investors need cash most. If yields keep climbing, that is a major headwind for metals - they are not the place to be right now.
The dollar
On the monthly chart, the US dollar is clearly channeling upward, and the pattern matches earlier setups that led higher. I expect the dollar to push up toward 120. For a Canadian, that could mean a $1.73 exchange - one US dollar buying $1.73 Canadian. The Canadian dollar should struggle. I hold all my investments in US dollars for the long term; the dollar could move up 14, 15, 16%, or more. As an international trader, holding cash in US dollars looks like a good percentage play. A UK investor or one in another currency may see it differently.
The bond selloff is not just US - it is across all G7 countries, with yields rising this year in every major developed nation. So why favor the dollar in a global bond selloff? Because in most stressful environments the US dollar becomes the safety play. It is still the reserve currency. When people get nervous, they move to the dollar - partly habit, partly how it has always been during crisis and uncertainty. As yields go up, capital naturally gets pulled toward that currency, strengthening it. Stronger dollar demand also pressures gold, silver, and foreign currencies. For an international saver, currency exposure can reshape returns before the underlying asset even moves.
Asset revesting and the bond market
I look at markets from a high level across asset classes using a strategy I call asset revesting: invest in whichever asset is getting the money flow, and do not hold it when money is flowing out. In a stock bull market, own stocks - you can diversify across sectors. But when the market tide goes down, every boat goes down with it; sector choice does not save you. Bonds work the same way regardless of type or country - if bond prices are falling, you do not want to hold them. Bond prices right now are in a major bear market. If you are only in bonds to collect the interest as a safety play, that is a different case, and rising yields help you there. Sometimes owning no stocks at all and sitting in cash earning interest safely on the sidelines is one of the best positions to be in.
Stocks: bullish charts, panic selling, hidden weakness
The S&P 500 is no longer at all-time highs, sitting around 7677, and the last week has been poor overall except for a few tech names - Meta (META) has done well, Nvidia (NVDA) caught a bit today.
I am still long equities. There are many bullish chart patterns: a long bull flag, a smaller bull flag, and a tight high-momentum bull flag, all pointing higher. The NASDAQ chart looks even stronger in some ways. Our custom panic selling indicator is spiking above 3 today, which usually means the general public is dumping shares with no regard for price. The VIX is up and panic selling is hitting the New York Stock Exchange, the big board where average investors hold the big brand names. When they dump on the bid, the NYSE volume ratio spikes. Historically, a reading above 3 is followed within 1 to 3 days by a market bottom and a pop that takes off without them.
On NASDAQ futures, the recent rally and pullback hit the 0.618 Fibonacci retracement, a critical level that lines up with a previous high acting as resistance. When price hits the 618, pauses, and pulls back a little, it almost always runs to the next level. That points to an easy 3-5% move up, possibly by the end of the week. Longer term, a giant bull flag with a Fibonacci extension points to about 35,100 on the NASDAQ - roughly a 15% move. The MAGS group (MAGS) and semiconductors (SMH) both show bullish patterns. If those break out and run, they drag the indices up and pull in FOMO buyers, driving a strong pop.
But a rebound does not repair the underlying market. Chasing the first green candles can mean buying into the exact liquidity window that panic created. If a strong pop turns into a feeding frenzy, we inch closer to a major stock market top. Yields are what could put the top in - once they hit 6 to 6.5%, that is likely the breaking point. That yield is high by recent standards and pays more than many dividend stocks and sectors, so you can sit on the sidelines with no downside risk for the same return you get owning some companies.
Breadth is deteriorating
Per Larry McDonald of the Bear Traps report, market breadth has gone ugly: new lows are outnumbering new highs and risk indicators are turning up fast. More than 15 global hall-of-fame brands, from Lululemon (LULU) to Nike (NKE), are down 25 to 75% from their highs. More S&P 500 companies are making new lows than new highs, putting breadth at a multi-year low. I check breadth occasionally, but it does not factor much into my strategies.
The market is weak and has not been healthy for a while. Earnings are still strong, but most stocks are not. Technology stocks remain very strong with bullish patterns, and because they are so heavily weighted, they mask what is happening underneath. We are seeing sector rotation - sectors up 20-30% one month and down 20-25% the next - which is classic stage three topping behavior. The market grinds higher and people feel left behind even as it weakens. That camouflage is the trap: a rising index hides a deteriorating market when leadership gets this concentrated. Do not try to pick a top until the trend actually turns down and gives a sell signal. Right now the MAGS names and the semiconductors are holding the whole thing up.
