Hi YXI friends,

Since the beginning of the bull run in late 2022, Gold has has led SPY in total performance, 75% vs 57%. Nothing seems to slow it down. Emerging market central banks are buying. Global ETFs are buying. Investment Bank Research Analysts all predict higher highs for this year.

Has euphoria dawned on us? Let’s dig in.

Table of Contents

• 1. Gold Reaches $3000

  • Gold vs G5 M2 Money Supply

  • Global ETF Flows

• 2. GLD Price Technical Analysis

  • GLD Macro Correlations

  • April Seasonality Is Challenging

  • GLD Price Technical Analysis

• 3. Silver (SLV) - More Opportunity From Rotation?

  • SLV Technical Analysis

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Gold Reaches $3000

On Tuesday March 18, Gold price reached another major milestone - the $3000 mark for the first time.

It took 18 years (2008-2020) for Gold to move from $1000 to $2000, the previous two milestones.

Remarkably, it took just 5 years for Gold to move through from $2000 to $3000, although maybe the 50% rise is not as impressive as the 100% rise in the previous milestone.

Interestingly, when Gold reached its previous $’000 milestones, it pulled back immediately on both occasions.

In 2008, Gold pullback 27% after reaching $1000, lasting 8 months.

In 2020, Gold pullback 20% peak-to-trough, lasting 2 years.

We can talk more about the price technical in a moment, but the historical context does seem to suggest incoming headwinds.

Gold vs G5 M2 Money Supply

Here we use the M2 money supply of the world’s five largest economies to approximate Global Liquidity: the US, China, Eurozone, UK, and Japan. The measure is denominated in US Dollars (billions) on the left hand scale of the chart.

When we compare Gold prices (using GLD, the Gold ETF as a close proxy) with movements in Global Liquidity, we observe a 30-day lag between the two up until January. This means the Gold price before January moved in the same direction about a month after the Global Liquidity had expanded or retreated.

However, there seemed to be a significant regime shift since mid-January.

After January, Gold pulled up and away on the back of DeepSeek and tariff fears, while China’s PBOC continued buying. The lag between Gold price and the Global M2 seemed all but vanished.

Now, this could be purely coincidental - the fundamental demand for Gold due to macro uncertainties surged beyond the impact of negative G5 M2 changes. As I mentioned on Monday, liquidity is like wind - birds can fly in the opposite direction provided it has the will, but it just takes more effort.

Global ETF Flows

Gold ETF inflows have been astoundingly strong since the beginning of the stock market sell-off in mid-February. The biggest demand comes from North America.

Over the 5 weeks starting mid-February, North America ETFs bought over 110 tonnes of Gold. Forget China!

In my December 9 and December 30 articles, I wrote,

And I think here we are now at the final stage of the rally.

2. GLD Price Technical Analysis

GLD Macro Correlations

GLD shows very neutral correlations with the 10Y yield and SPY. GLD trades negatively to DXY (USD), which is as expected, as Gold is quoted in US Dollars.

Interestingly, GLD’s correlation with SPY was as high as 0.6 pre-February sell-off.

During the initial sell-off, Gold pulled back with SPY, but found a bottom a week later, as investors fell into the risk-off panic mode. This pattern should be noted going forward.

April Seasonality Is Challenging

GLD is typically strong in March (60% win rate with an average return of 1.7% since 2005), but weak in February. In the past 20 years, GLD ended up in the month just 40% of the time, with an average return of -0.4%.

The chart above shows GLD’s performance in each of the past 20 years. With the exceptions of 2009 and 2021, investors hadn’t much to look forward to.

GLD Price Technical Analysis

GLD (https://www.tradingview.com/x/Y3vmkLLx/)

In my previous article, I wrote that, “Ultimately, I do see GLD reaching $280 this year, but that could mark the completion of what’s been a very long and exciting bull run.”

We have now reached this target, now what?

My Elliott Wave count sees wave 5 reaching the 1.764 inverse extension of wave 4. While GLD can stretch further into $285, I do think we are very near, if not already, at the end of the wave 5 of (5).

And let’s just zoom out to see how powerful a run Gold (GLD) has enjoyed in the past 2 years.

GLD Price Chart 2

GLD Weekly (https://www.tradingview.com/x/Wjtzv7mu/)

Since the beginning of this entire run in 2016, GLD’s price has increased by 180%. But wave 5 since 2022 saw the strongest trend, up 85% in 2.5 years.

It is too early to map out how far it could fall - we’ve barely seen some red candles in the past week. For now, I would simply urge caution for the bulls.

Didn’t you say China will keep buying?

Yes, China buying will be a long-term trend in an effort to dedollarise. I can see them conservatively double their holdings by the end of the decade.

However, they are not price-insensitive, aggressive buyers. China’s latest monthly purchase have been way smaller than their 2023 averages. This suggests to me China is patient in their gold buying.

In combination, I favour a near-term pullback as the 5 waves complete (into the technical correction territory), but structurally, Gold should continue perform well in the long-term.

3. Silver (SLV) - More Opportunity From Rotation?

GLD vs SLV

Gold and Silver share very high daily correlations as precious metals. However, over the long-term Silver has significantly lagged Gold in price appreciation. Silver’s market cap is closer to Bitcoin, i.e. 1/10 of Gold.

While I do see Gold near the very end of this bull run, there could be more rotational opportunities in Silver, as investors could play the “catch-up trade”.

SLV Technical Analysis

SLV (https://www.tradingview.com/x/y67yAowp/)

My technical read is that SLV has not yet completed all of its 5 waves, now likely in wave 3 of (5). Wave 3 could reach $35 first.

The invalidation comes if SLV breaks below $28 (i.e. no rotation, straight down with GLD).