Examining the chart above, it's evident that gold has experienced several prolonged periods of consolidation, often lasting decades after reaching all-time highs, with a typical decline of over 45% in value before eventually returning to those previous highs. I'm addressing this today to provide insights into investing in gold. Although many assert that gold serves as a store of value, the 45%-65% drops it frequently undergoes challenge that notion, making it difficult for me to embrace that perspective.
I believe gold can still be a worthwhile investment; however, I contend that the most effective strategy for investing in gold is through long-term dollar-cost averaging (DCA). For instance, if I aimed to invest $100,000 in gold, I would prefer to purchase $10,000 annually over a decade rather than investing the entire amount at once, which could lead to a potential 60% loss and result in long-term illiquidity.
With the emergence of the digital gold revolution, there's a significant risk that Bitcoin (BTC) may finally supplant gold as the primary store of value. When comparing the ROI of BTC to nearly any other asset over time, it becomes clear that nothing compares. While BTC has experienced extreme volatility, similar to gold's 65% declines, the key difference lies in BTC's ability to reach new all-time highs within a maximum of five years, whereas gold often takes decades to recover. As BTC's market capitalization grows, its price fluctuations should become less severe, and with banks now permitted to hold cryptocurrency, the landscape could become quite intriguing.
Historically, gold appears to breakout from cup and handle patterns, potentially leading to 65-70% rallies, as indicated in my 3 charts above, suggesting a peak price of around $2800 per ounce. I advise caution, as I believe the digital revolution (Crypto, AI, Quantum Computing) may dampen this surge, and we could be nearing if not already the peak, possibly signalling the end of gold cycles. In my experience with gold cycles, I've observed that when non-investors urge me to buy gold, proclaiming unrealistic future values and a return to the gold standard, it often precedes a downturn. Notably, many people I know currently view gold as the best investment and store of value, likely due to the prevailing narrative and the recent inversion of the yield curve, prompting a rush toward gold in anticipation of a market correction. If gold is to breach $2,800-3000 area, I believe significant corrections in major indexes and crypto markets are necessary. Given that Donald Trump frequently boasted about the financial markets during his last presidency, even amidst unprecedented trade wars, I find it unlikely that conditions will worsen significantly. Furthermore, the recent removal of SAB122 allows banks to hold crypto, potentially serving as a substantial catalyst for upward price movement and draining liquidity from other financial markets.
Also worth mentioning is that in the main chart you can see that if you draw fib retracement from the bottom of last run to the top you'll see that our 1.618 sits around 3k. if you draw from the bottom of the last handle you'll notice the 1.618 sits around 2700 which we've now slightly over extended. i would say there is plenty of upward resistance with nothing on the downside until around 2k.
Nonetheless, I view gold as a highly risky investment; once it declines, it takes an exceptionally long time to recover. I would prefer to invest in the S&P 500, especially if employing a DCA strategy, as it serves as a far superior store of value. Even after a major correction, the S&P typically regains its all-time highs within just a few years. For the average investor who isn't actively trading, I don't believe gold is a sound investment for this reason. I encourage you to compare the charts of gold and the S&P over the past 50 years and calculate your ROI if you had invested $10,000 annually in each; you'd likely find yourself significantly wealthier with the S&P 500. I have heard many rumours of countries such as USA and china going back to a gold standard but IMO the world always tends to move forward and i think gold is going to be left behind the the wake of crypto. GLTA
Trade active
just wanted to add that while i don't see gold securities as a good investment i will probably start buying physical gold around 2000/oz and dca for a bit. be nice to have a couple shiney bars laying around for trade if the computers ever crash and suddenly our cashless society has nothing to trade with ;).
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.