How to Know When Gold Has Peaked
NIA’s December 26, 2022 Gold Moon Indicator forecast that gold would rise from $1,753.50 per ounce (November 30, 2022) to at least $6,539.33 per ounce within approximately 36 months. Today, after 38+ months, gold stands at $5,000 per ounce… already validating the trajectory of that forecast.
We remain confident that gold will reach a minimum of $6,539.33 per ounce this cycle. The only uncertainty is timing. Importantly, the January 1980 high of $850 per ounce… adjusted for M2 money supply per capita… now equates to approximately $8,478 per ounce, which provides a historically grounded reference point for this cycle’s upside potential.
The U.S. Dollar Index (DXY) currently trades near 97, roughly in line with its 59-year average. However, the long-term structure of the DXY remains decisively bearish… a pattern of lower highs followed by lower lows. We believe the DXY is likely to break below its March 2008 all-time low of 70.70 in the years ahead. When that occurs, gold prices will be significantly higher. In our view, this gold bull market does not end until the DXY makes new structural lows.
To suppress gold meaningfully from reaching inflation-adjusted levels near $8,478 per ounce, the Federal Reserve would likely need to engineer extreme tightening similar to 1979–1981… pushing the Fed Funds Rate into the 11%–19% range. Only at such levels, where rates materially exceed inflation, would gold face structural pressure. Ironically, that would likely mark the ideal entry point for long-duration Treasuries such as the iShares 20+ Year Treasury Bond ETF (TLT)… after gold peaks and real rates turn decisively positive.
Meanwhile, positioning data continues to support the thesis that precious metals are far from bubble territory. It is highly likely that GLD, SLV, GDX, and GDXJ will see shares outstanding rise to new all-time highs over the next 12–24 months. Ownership of gold and silver ETFs remains historically low relative to equity exposure.
The contrast with Vanguard S&P 500 ETF (VOO) is striking. Between February 8, 2016 and October 14, 2020, VOO attracted $72.043 billion in cumulative flows… less than double the $39.199 billion that flowed into the six major gold/silver ETFs (GLD, SLV, GDX, GDXJ, SIL, SILJ).
From October 14, 2020 through today, VOO has absorbed $395.55 billion… more than 93 times the $4.249 billion that flowed into those same precious-metal ETFs over that period.
That is not diversification. That is concentration.
Many adherents of the “FIRE Movement” have been conditioned to allocate aggressively into VOO regardless of valuation. Enterprise value/revenue multiples for companies such as Nvidia, Apple, Tesla, and Microsoft have expanded dramatically, yet the default advice remains: “keep buying.”
Ironically, gold has been outperforming VOO… but suggesting diversification into precious metals often triggers hostility rather than analysis. The real systemic risk is not gold collapsing… it is over-concentration in passive U.S. equities.
If a significant percentage of Americans “retire early” based primarily on equity gains without corresponding productive reinvestment, that creates structural fragility… particularly as China remains highly competitive in AI development.
Looking forward, we expect meaningful volatility in the S&P 500. Even under a best-case scenario of modest continued gains, a declining DXY environment historically favors foreign markets. We favor the iShares MSCI Brazil ETF (EWZ) among broad exposures, and in Asia, companies such as Trio-Tech International (TRT) with rapid AI-driven revenue growth may offer asymmetric upside potential.
History also offers perspective. Gold’s last bull market stalled in September 2011 partly because high-quality equities were historically cheap. For example, Microsoft (MSFT) traded in 2011–2012 at a free cash flow to enterprise value yield of 15%–18%.
On October 28, Microsoft’s free cash flow yield bottomed at a 26-year low of 1.77%, and currently sits near 2.50%… levels comparable to March 2000. Notably, Microsoft did not surpass its March 2000 share price until 16+ years later, in August 2016.
If AI becomes commoditized, it won't hurt TRT’s margins, which are likely to improve significantly. By contrast, Microsoft faces margin pressure risk if inference costs remain high and enterprise customers resist paying AI premiums… particularly as its cloud business transitions from hyper-growth to maturity.
Finally, consider corporate behavior. We attempted to cancel Adobe after ceasing use of its services, only to discover we were locked into a long-term contract buried in fine print. That experience reinforces our view that Adobe’s recent decline does not necessarily represent value. In our assessment, Adobe would need to fall another 50%–75%… while our gold/silver equities rise substantially… before we would consider it attractively priced.
This weekend, NIA is publishing a report on its latest brand-new stock suggestion Pacifica Silver (CSE: PSIL).
Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. NIA’s President owns a position in EWZ. NIA has received compensation from PSIL of US$100,000 cash for a twelve-month marketing contract. This message is meant for informational and educational purposes only and does not provide investment advice.