Gold appears to have formed one of the strangest bottoms I have ever observed. While nothing in markets is ever foolproof or 100% certain, the weight of the evidence convinces me that gold has put in at least an intermediate bottom. The price could still head lower — that possibility cannot be ruled out — but it does not seem likely given the underlying data. What makes this bottom so peculiar is the combination of strong physical delivery demand alongside almost nonexistent speculative activity, and that contradiction is the key to understanding what is happening.

In quick summary, the situation has these characteristics: high physical deliveries, very low futures trading activity, the spot contract remaining the most active contract in terms of open interest, open interest sitting at 20-year lows (indicating no speculative activity in the futures market), ETFs losing gold rather than gaining it despite the bottom, and a survey from the World Gold Council showing central banks intending to increase gold reserves and decrease dollar reserves.

Stocks Are Back at 1929 Bubble Valuations Relative to Real Money

A critical starting point is the relationship between stocks and gold. Measured against real money — that is, against gold — the S&P 500 is back at its 1929 bubble-top valuation. The gold-to-S&P 500 ratio today is the same as it was at the 1929 bubble-top high. This is a measure of stock valuations relative to money itself, not relative to dollars.

Tracing the long-term history: the 1929 bubble top was followed by the Great Depression, and Great Depression-level valuations of the S&P 500 relative to money persisted throughout the 1930s and 1940s. Stocks then began pulling away starting around 1950, climbing until the bubble top of the late 1960s — around 1968, when the London gold pool finally broke — and continuing through 1971, when the gold window was closed. From that point, stocks descended into the 1970s, with a partial recovery along the way that resembles the current correction gold has experienced over the past four or five months, and then fell into a depression-level bottom in stock valuations relative to money. The 1980 low in stock valuations was about the same as the 1932 bottom.

Right now, valuations are back at the 1929 top. That level is significantly lower than where we were in 2000–2001, which was the ultimate, mega, crazy bubble top — popularly called the dot-com bubble, but really a bubble of all stocks relative to gold. Looking at the chart of stocks relative to gold, there is a 2011 bottom (September 2011), and the structure now resembles a long-term head-and-shoulders topping pattern going back to 1968. I do not believe we are going to head much higher than this. Instead, we are going to revisit the 1980 lows, which correspond to the 1932 and 1938 bottoms, and what looks like the 1942–43 World War II stock bottom relative to gold.

When that happens, it will be the end game. Because so many more people are invested in stocks today than in past cycles, far more people stand to lose their portfolios and their purchasing power, and all of that wealth will flow back into gold — exactly as it did in 1980, in 1932, and in the 1940s during World War II. It is important to understand that stocks can hit record highs in dollar terms while becoming dramatically poorer measured against real money. The danger is that investors measure gains in dollars while losing purchasing power underneath. Portfolio damage rarely announces itself in headlines; it compounds quietly through the denominator. A valuation extreme like this does not automatically predict a crash, but it places the market in territory historically associated with valuation extremes rather than genuine prosperity.

The Bear Trap Reversal: First Piece of Evidence

The first piece of evidence for the bottom is a pattern best described as a bear trap reversal. I am not a technical expert, but I look for this specific sign at bottoms, and we have seen it before at previous gold bottoms.

Gold made a bottom around March 23rd at roughly $4,100 — actually a bit lower, around $4,086. When that prior bottom is broken, as it was around June 11th–14th, you would expect the break of that low to trigger a wave of sell stops. And it did — there is a candle that dipped below to about $4,030–4,032. So we had a break of major lows in gold for about two days. But then there was almost no follow-through at all, and an immediate reversal occurred.

That reversal alone is not enough to convince me a bottom is in. The market could theoretically test that low again in the future. But I do not think it will, and even if it does retest, I do not believe it will break. The reason for that confidence comes from delivery data. Failed breakdowns often matter more than dramatic rallies because they reveal who absorbs forced selling — markets rarely ring a bell at turning points; they trigger maximum doubt first.

High Deliveries, Low Futures Activity, and the Significance of Warrants

The second and most important piece of evidence is the combination of high physical deliveries with very little futures activity. Most of the new contracts being opened are in the spot contract rather than in forward futures months. And critically, every time there is a dip in the gold price, there is a huge spike in deliveries of warrants.

A warrant is one specific gold bar represented by the contract — not a theoretical bar, but an actual 100-ounce bar with a warrant attached to it. The critical thing about taking warrant delivery is that you cannot use leverage. To trade futures, you only have to put up the margin — perhaps 18, 19, or 20% of the value. But to take a warrant, you must put up 100% of the value in cash. You have to be willing to commit the full amount.

What we see is spikes in deliveries from immediate spot-contract buying on days when gold dips. This happened during the bottom on June 15th, when there was a reversal and a failed breakdown. From a tag of the double bottom around $4,050–4,080, there was a marginal breakdown but no follow-through. Whenever the price drops toward $4,100–4,200, these spikes in delivery statistics appear, meaning traders are willing to put up full cash for a warrant of an actual 100-ounce bar once the price dips below roughly $4,100–4,300.

This indicates fundamental physical demand at these levels — demand that I do not think can be broken. Whenever speculators drive the price below that shield, physical demand picks up again, visible through the deliveries. When buyers commit full cash instead of leverage, the signal changes completely: physical delivery demand may matter more than headline futures volume because it reflects capital willing to settle rather than merely speculate. That distinction tends to get lost in media coverage focused on price candles rather than ownership behavior. For savers protecting purchasing power, understanding who actually takes delivery can matter more than short-term volatility.

Reading the Open Interest Data

Looking at the latest open-interest changes — how many new contracts were opened on the day gold ostensibly bottomed — most of the activity was in the spot June contract for immediate delivery, not in the forward futures months. Because buying within the delivery window requires 100% of the warrant's value rather than just margin, this is a sign of genuine physical demand rather than speculation. There was a little activity in the December contract (up 948 contracts), but most of the action was in the spot contract.

The numbers: an increase of 569 contracts alongside 706 deliveries. Normally, deliveries subtract from open interest, because delivered contracts close out — 706 deliveries should reduce open interest by that number. So the net movement was about 1,275 contracts (706 deliveries plus 569 net increase) in the spot June contract. That is far more than all the forward months combined. The forward months actually fell despite gold bottoming and moving up. Ordinarily, when gold bottoms and rises, you would expect speculative activity and open interest to increase — but that did not happen. Demand appeared strongest precisely when price looked weakest, which is the opposite of how speculative tops behave. If immediate delivery activity rises while speculative participation stays muted, the market is communicating something very different from the headlines.

ETFs Are Losing Gold, Not Gaining It

Another peculiar feature of this bottom is that the ETFs are not participating either — there is no speculative fervor in the gold ETFs, neither GLD nor IAU.

In the GLD data, red bars represent the ETF losing gold. Each time the figure drops, the ETF is selling gold to keep its share price aligned with the gold price, which happens when there are very few speculators interested in the fund. GLD has been losing gold since March, after the top. Speculation rose until gold retagged about $5,000–5,250 (it reached $5,300 even), and since then the fund has been bleeding gold and has not added any since May.

The same pattern appears in IAU, the other popular gold ETF, which has hit a new low since September of last year in the amount of gold stored in the fund. There is simply no speculative excitement in any of the ETFs or in futures trading at all.

On top of this, overall open interest is still near 20-year lows — around 2008 levels, roughly 18-year lows. This is genuinely remarkable. The price has moved higher while participation kept shrinking, which is the opposite of the story that retail investors usually get sold. ETF outflows and depressed open interest suggest this move lacks the speculative excess normally seen near major peaks. That does not guarantee higher prices, but it challenges the assumption that enthusiasm drives every rally. Investors protecting capital should pay attention when ownership broadens less than price does.

What Is Driving the Price Higher?

If there is nothing going on at the retail level or in futures trading, what is causing the gold price to rise? The answer is marginal buyers — very few and far between. Now imagine what happens to the gold price when consciousness and bullishness wake up again, once a new round of money printing begins in response to some kind of banking crisis. Such a crisis is surely headed our way, with interest rates heading higher because of increases in consumer prices.

A note on terminology here: what Keynesians call "inflation" — rising consumer prices — is really just the effect of inflation. True inflation is the increase in the credit supply, which is the dollar itself. Rising consumer prices are the consequence, not the cause.

The World Gold Council Survey: Central Bank Intentions

The final piece comes from a World Gold Council survey. They asked 71 central banks: "How do you expect total reserves to change five years from now?"

For reserves expected to go higher: 84% said gold; 67% said the RMB (the Chinese renminbi or yuan); 42% said the euro; and only 11% said they would increase their holdings of US dollars (whether cash or, more usually, treasuries).

For reserves expected to remain unchanged: only 11% said their gold holdings would stay the same, and only 15% said their US dollar holdings would stay the same.

For reserves expected to go lower: only 5% of respondents said their gold holdings would decline, while 74% said they expect their US dollar holdings — or dollar-derivative holdings like treasuries — to go lower. These figures combine the "moderately" and "significantly" responses. So 74% of central banks believe their dollar holdings will fall either moderately or significantly, and 84% believe their gold holdings will rise either moderately or significantly.

The key insight here is about positioning, not collapse. Nobody is talking about reserve-preference changes because the headlines still say confidence remains intact. But institutions adjust long before public language changes. Central banks can diversify without declaring a new monetary system, and that distinction matters enormously. Savers who wait for official confirmation usually arrive after the repricing has already happened.

Does This Mean the Dollar Is Losing Reserve Status?

This raises the obvious question: Does the central-bank shift toward gold mean the dollar is losing reserve status? My answer may be surprising — no, it does not — and there are two reasons.

First, the other currencies in the survey — the RMB, the euro, and probably others — are all dollar derivatives. They are dollar derivatives because of the skeleton of what remains of the Bretton Woods system. All of these currencies aim to maintain a certain exchange rate with the dollar; if they drift outside that window, the central bank must buy or sell dollars to keep the rate within range, which they do. These currencies were all born as dollar derivatives after World War II, and they will all die as dollar derivatives. You cannot lose reserve status by shifting into a derivative of that same reserve — it makes no logical sense.

The only thing that is not a dollar derivative is gold. And here the logic runs deeper: gold is not a dollar derivative because gold is money, and the dollar is itself a gold derivative — still primarily a gold derivative, just inflated by an enormous amount of debt piled on top of that derivation.

Second, consider this follow-up question: If central banks are almost entirely in agreement that they will increase their gold reserves, doesn't that mean the dollar is losing reserve status? Again, my answer is no. The reason central banks buy gold is not to make it convertible into their currencies, nor to make their currencies convertible into gold. They buy gold in order to sell it to strengthen their currencies. And strengthen their currencies relative to what? Relative to the dollar. It is all in service of keeping those exchange-rate windows intact.

The crucial distinction is that reserve accumulation and reserve replacement are not automatically the same event. Mainstream analysis has a blind spot: it treats every gold purchase as a vote against the dollar, when in fact it can simply be hedging behavior. Confusing hedging with regime change distorts allocation decisions.

Reserve Status Will Be Lost Suddenly, Not Gradually

Yes, the dollar will eventually lose its reserve currency status — that will happen. But it will not be a gradual affair. The consensus assumes reserve status fades slowly along a smooth line, but history rarely moves that way. The loss will be sudden.

It will come once the next and final money-printing round of quantitative-easing inflation begins, triggered by a banking crisis that is bound to happen fairly soon. That event will trigger the loss of reserve currency status in favor of gold. Gold will become money once again and will be traded as such, and international trade will be based on gold for lack of any other alternative. This is not anything anybody wants — there will simply be no other choice. All other currencies are dollar derivatives, so the dollar cannot lose reserve status by passing through one of them; it can only be displaced by gold, which sits outside that derivative chain entirely.

When this happens, we will have to return to money and to a more balanced society. Much of centralized industry will crumble and disintegrate, and there will be a large rebuild from there. But ultimately it will be very healthy — for our species, for the planet, and for whoever lives in this quadrant of the galaxy.

The Practical Takeaway for Investors

This thesis shifts from market analysis into a question of systemic transition. Markets usually break trust long before they break price. But the more practical question is what investors actually do with uncertainty today. Extreme forecasts attract attention, yet concentration risk destroys portfolios faster than missed upside ever could. Wealth preservation is less about predicting collapse and more about surviving a range of competing outcomes. The compressed open interest, the absent retail and ETF speculation, the spikes in full-cash physical delivery on every dip, and the central-bank tilt toward gold all point the same direction — but the discipline that protects capital is positioning to endure whichever scenario unfolds, not betting everything on a single forecast.