Analysts warn about signs of peaking in gold’s monster rally

Gold broke through $4,100 per ounce this week, a record high that has shocked traders across markets. The rally has now pushed its year-to-date gain above 50%, while the S&P 500 has climbed just 14.5% in the same stretch.

Since the rally began in October 2022, the metal has advanced by about 150%. That figure is lower than the 293% average increase seen in past bull runs since the 1970s, according to Bank of America, but this one has moved much faster.

Bull markets in gold usually last around 43 months, and this run has reached its peak in only 36 months.

The drivers are clear: looser policy at the Federal Reserve, the drop in the U.S. dollar, and demand tied to what traders call the “debasement trade.” But some think the rally could be overheating.

Michael Hartnett, a strategist at Bank of America, said in his Flow Show note that the buzz has spilled far beyond trading desks. He shared:

“My brother-in-law recently told me he was having lunch with X and asked whether to buy physical gold or silver or if it was already too late, since his wine investments have been tanking.”

Hartnett also pointed out that gold has logged nine straight weeks of inflows, bringing in $2.1 billion this week. Still, that was the smallest inflow in three weeks.

Analysts warn about signs of peaking in gold’s monster rally

Michael Hsieh, strategist at Deutsche Bank, analyzed that technical indicators suggest the rally is about to hit a peak. In his words:

“We do not see this as a sign of an impending correction. At most, it may point to a period of more neutral behaviour like that between June and August. Fair value has risen along with gold in the past two months.”

That means the market could settle into a pause rather than collapse outright.

Silver is also rallying, hitting $50 per ounce for the first time ever just yesterday as investors reacted to a supply squeeze in London. Vaulted silver, which has filled the gap in the market for years, is now described as “running dry.” That shortage has tightened the physical market, forcing prices higher and adding to the metals’ rally.

Some see the rally climbing far higher. Randy Smallwood, Chief Executive Officer of Wheaton Precious Metals Corp., said during an interview on Bloomberg Television:

“I’m confident that we will see gold over $5,000 within the next year. It’s a trajectory that could easily put it up to $10,000 an ounce before the end of the decade. It wouldn’t surprise me at all.”

Randy also addressed the pressure on silver. He said, “We’ve been operating in a deficit mode in the silver market for a long time. Vaulted silver has been feeding the deficit, but now those vaults are running dry.” The shortage has strengthened the case for investors turning to metals as supply remains tight.

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