Gold Has Topped
Gold put in a major blowoff top, a euphoric peak, and is now selling off. The most important support level to watch is about 3,300. I want to see gold fall, hit a bottom, build a base, and start turning up again before touching it. I am not in gold.
How long a bear market lasts is hard to guess. In 2008 it was short, about eight or nine months from the point it broke down and collapsed. The 2000 bear market took three years to unwind. So instead of guessing timing, I follow key levels. The big question is whether gold hits 3,300 in the next month or two and stabilizes while the rest of the world falls apart, or whether it slowly grinds down for years. In 2011 gold peaked, broke down, then ground lower for several years. That could happen again: gold drifting down for a few years while the stock market corrects and the dollar rallies. Timing, not headlines, decides who keeps their wealth.
I Sold My Physical Metals
I closed my physical gold position just above 5,000 and my silver position above 113. Everything was warning that this was a major blowoff top. This is the first time in decades I have not held physical metals. I sold at a premium and want to buy back much cheaper, but only once metals put in a bottom, turn a corner, and start moving higher, so I catch the next move up.
Be very cautious here. You could lose five or ten years in precious metals with no return and waste a lot of time. Time is money. Metals cost money to hold. You can earn more in a simple savings account than by holding physical metals that go nowhere for years. Move your money somewhere that generates a return. For now the stock market is still one of the better places to be, until it starts a downtrend.
The Trap of Round Numbers
The 4,000 level is a real short-term support. It comes from a breakout last year, it is a previous support level, and it is a whole number. Whole numbers like 4,000, 5,000, 6,000, or 3,000 pull in buyers on their own. When price falls toward 4,000, people tell themselves it looks like a good spot and buy. I hear it constantly: "you missed the bottom, it was 4,000, we got a beautiful bounce." That bounce is just a pause, an emotional level where buyers step in.
Gold is in a bear market. The odds are it goes back down to 4,000, eats through everyone accumulating there, then breaks down and keeps falling. Buying that is buying inside a downtrend, which is dangerous and not smart. I do not average down and I do not buy in a downtrend. I wait until price breaks out into an uptrend. From here I expect gold to have another 15 to 20% correction and sell off. So 4,000 is nothing more than a short-term technical support inside a downtrend.
Silver and Mining Stocks
Silver is the highly speculative play. If gold turns up and the metals space is on fire, you want to own silver, because it is one of the fastest top movers. It is also very dangerous and wipes out its gains quickly. During this last rally I held about 65% silver, because it has the most upside, and kept the rest in gold for its stability, slowness, and predictability. I made a lot of money on silver this bull market, and there will be another time for it. But you only get in when it is on fire; you do not hold it on a sinking ship.
Mining stocks, like GDX, have put in a high-volatility top. The 150-day moving average is sloping down, which signals a bearish environment. There is a series of lower highs and lower lows, the definition of a downtrend, with the moving averages sloping down.
What I Am Waiting For
I want nothing to do with the precious metals space right now. I want to wait for a huge capitulation, a big washout low. One of two things will happen. Either gold, silver, and miners crash hard, volume spikes, they put in a low, then rally and turn from a downtrend into an uptrend. Or they stabilize, build a base, and break out of that base into a new uptrend.
I do not care if I buy back at a higher price. When I put money to work I want it moving up on average every month, not sitting underwater with heavy downside and no return. I am not trying to buy the lowest price; I am trying to buy when a new uptrend starts, whether that is lower or higher than today.
Real Estate Looks Strong for Now
Real estate is still doing well and holding up. The stock market, like the NASDAQ, has been selling off, but real estate has gone up. We hit a target on our IYR position about a week ago as it spiked. I like real estate and utilities as defensive plays.
Eventually real estate gets hit very hard. Interest rates rise, a financial crisis hits, stocks blow up, people lose their net worth, and that trickles into real estate. Right now it holds up better because when growth and technology investors get nervous and sell, they move to what they know best, and everyone has been taught that real estate is a good investment, which is not wrong. So they buy IYR. But buying a real estate ETF is not the same as buying real property. That ETF can drop 50 to 75% in a bear market, while physical properties generally will not. Short-term money is flowing into this space, and it looks like it wants one more leg higher.
A Broad Trend Reversal Is Building
Once the trend changes, I do expect a reset in valuations, and yes, a possible crash-style event. My outlook is very bearish. I believe we could have a big financial crisis that pushes valuations back down to genuinely undervalued, fair-value levels, which is where they should be. Major asset classes are all turning corners at once.
The dollar is a good barometer of what is coming. On the weekly chart it built a bottoming formation over the past year and a half to two years, broke out, turned a corner, and is now rallying. A rising dollar usually means stocks weaken, the global economy weakens, and fear rises. I think the dollar really takes off from here, which tells us things are changing dramatically. Meanwhile precious metals topped with that blowoff pattern and gold is now in a bearish trend, its 150-day moving average rolling over with all moving averages sloping down beneath it. So the dollar is in a new bull market while gold, silver, and miners are in a new bear market.
Money is rotating fast between sectors, into one sector one month and out the next: memory stocks, utilities, AI names, semiconductors, cyber security. Capital does not know where to go. The market is at a critical junction and keeps getting weaker, even though the main trend is still up. Watch the June lows in the stock market. If those break, we could see a huge reversal that triggers a multi-year bear market, cutting valuations in half or more. Maybe not as deep as 2007 to 2008, but with very sharp corrections. That would be a great opportunity. I am not saying it will happen, but the charts are starting to point there.
Oil, Rates, and Bonds
War is picking back up. Crude oil is skyrocketing. As oil shoots up and war spreads, inflation becomes a major concern, and interest rates start rising. The 30-year is already over 5%. The 10-year and 30-year rate charts all point toward very high rates. They do not have to reach 8%, but if rates keep pushing higher, they cause a huge problem and could trigger a massive financial crisis.
As rates rise, bonds fall. TLT is the clear example: the price of bonds is testing major lows and is on the verge of breaking down. Many investors hold bonds as an investment and could see a very sharp drop. The dollar, precious metals, interest rates, and the bond market are all turning at once, and another major leg down would devastate a lot of people. That is the super-bearish outcome.
If the market holds up and a new wave of money flows into equities, it could still go higher. So play the bullish phase until direction changes, then have a game plan to benefit from these major trends. Higher rates do not need to hit extreme levels before cracks start spreading. Weakening bonds, rising yields, and a stronger dollar together are a combination no investor should brush off, and in a heavily leveraged system, higher rates could be very problematic. Markets rarely announce systemic stress in advance; they reveal it through these converging signals across many asset classes.
