It takes a special market to put gold in a position to rally.
It takes an even more special market to put gold in a position to post back-to-back 20%+ years of returns, but that’s exactly where the market is at this moment as volatility, economies and central banks are all playing right into the hands of the gold bugs.
Think you’re too late for the rally?
Think that you should be selling your gold now?
You’re wrong.
Take the next five minutes to discover why gold should be a major allocation to almost every investor’s portfolio in 2025.
I’ve also got a long-term trade idea that could more than double your return on gold’s bullish move higher. It’s a simple alternative to the buy-and-hold approach.
Let’s break down the three pillars of the gold trade right now….
The fundamentals of gold are simple. Historically people have considered gold as a good store of value.
Whether its inflation, market gyrations, geopolitical tensions, or anything else that makes investors question the value of their worth, gold has been the place to “park” your assets until the storm passes.
As I type this, the market – and the world – seem to be facing the entire list that I just rattled off, and more. And things aren’t going to calm down anytime soon.
It’s coming back! After more than a year’s battle with inflation, the Fed has made it clear that central bankers are worried about a resurgence of inflation.
At the heart of the concerns are the newly enacted tariffs against our largest trading partners. Some like to argue that the effect of tariffs will not see inflation return, but history tells us differently.
In the last week, forecasts for a 20% jump in new car prices, vegetables and meats along with other household staples have been made.
Walmart, Best buy and Kroger, those stores that we all frequent, have informed us that they expect the tariffs to result in higher prices on the shelves, and there’s nothing they can do about it.
Think about this… what if a company were to just accept the tariffs as a cost of doing business, lowering profits or even resulting in operating losses. What does that do to the market?
You get the idea.
The last two weeks’ developments have resulted in a geopolitical landscape that the country hasn’t seen since the days preceding World War II. Even our President pointed out in the Oval Office that we were gambling with World War III.
I’m not mongering fear or rattling sabers, just noticing the events that cause those sabers to get rattled.
I don’t have to go on. We all know the risks here.
Historically, the market has been able to adapt to geopolitical concerns relatively quickly, but current world issues are starting to make investors feel like the geopolitical pressure cooker is about to break a seal.
Let’s forget for a moment about the sideshow of “auditing” Ft. Knox.
Central banks have been ramping up their gold acquisitions notably since the U.S. decision to freeze Russia’s assets post-Ukraine invasion.
Data from the World Gold Council shows that, for the third year running, central bank purchases of gold topped 1,000 tons in 2024. The continued surge is in response to concerns over escalating U.S. debt and broader fiscal weakening.
Consequently, many central banks are shifting their reserves from U.S. Treasuries to gold, seeking to diversify their holdings away from the U.S. dollar amidst global economic uncertainties.
With the U.S. debt ceiling looking to move higher without any sign of the government balancing its budget, central banks and investors are not going to slow their purchase of gold anytime soon.
Is the gold trade crowded yet?
That’s the question that I am always trying to answer when looking at market sentiment for anything.
The answer right now for gold is “no”.
While gold has become more popular over the last year, there are still signs that the crowd doubts the trend will continue.
Just last quarter we saw an eight percent drop in prices that was immediately met with a flurry of analysts claiming that gold’s run had finally finished. It was time for the market to return to normal.
Wrong, this sentiment is just a sign that the “Wall of Worry” is still firmly helping gold climb higher.
To put it into context, investors clamor to buy NVIDIA, Palantir and other high-flying technology stocks at the first sign of weakness. Not the case with gold, investors and analysts appear to switch into insta-bears on a true “buy the Dip” opportunity with gold.
Looking at the options market, put options on the SPDR Gold Trust (GLD) immediately became active as options traders speculated that gold would continue its decline, another sign of pessimism.
Currently, the put/call ratio – a measure of sentiment via the options market – sits at a reading of 0.73. That tells us that there are 67 puts open for every 100 calls. Historically a ratio below 0.50 – double the number of calls than puts – suggests that a stock or ETF is seeing too much optimism.
I expect the put/call ratio to continue lower through July, a sign that more optimism, and money, is making its way into the gold trade ahead of the elections.
A check of Wall Street analysts finds that the target prices for gold among names like JP Morgan and Citigroup hover around $2,900 - $3,050, a target that gold has already surpassed.
Goldman Sach stands as one of the higher watermarks when it comes to price targets for gold at $2,900-3,100. Other major banks hold higher targets for 2025.
The bottom line on gold’s sentiment picture is firmly bullish as there are no signs that the trade has become “crowded”.
Gold’s chart is the Crown Jewel of this analysis.
From a long-term perspective, the SPDR Gold Shares (GLD) have been in a bull market since late 2022. The initiation of that bull market was signaled as the GLD crossed above its 20-month moving average.
There’s something odd about that if you watch the markets closely.
Gold emerged into a strong bull market trend as stocks were heading into a bear market during 2022, that’s normal.
What isn’t normal is that gold continued its strong run higher through the bull market in stocks that kicked off in 2023. Gold’s high correlation to stocks through 2023 and 2024 is just another sign of the fundamental underpinnings of this rally.
Gold’s current long-term bull market has the look, feel and returns of its rally from 2019 through 2020.
That rally made a two-year bull market run that resulted in more than 60% gains. The timing of that bull market run was like the current as its top was identified by the 2020 elections. We saw a similar spike in gold ahead of the elections, which is why many were ready to call the end to gold’s run in December.
Alas, the optics of the current administration’s policy changes are bringing more than enough uncertainty to the market and economy to fuel another two years of higher-than-average returns for gold.
On a shorter-term basis, Gold just completed a 5% “correction” last week that was met with little selling, even though it posted two large single-day losses.
That short-term pullback is now in the rearview of investors as nothing more than a “buy the dip” opportunity. Note also that you heard little to nothing about that dip.
Gold, the one thing that should be on everyone’s radar, is taking a back seat to investors worried about missing out on a bottom in stocks.
The short- and intermediate-term trendlines continue to forecast higher prices over the next 3-6 months.
The Gold Shares’ 50-day moving average is in a sharply bullish uptrend with support being drawn at $255 while its shorter-term 20-day moving average is turning from neutral to bullish drawing support from traders at $267.
The combination of these two technical trends is like what we saw in February as GLD shares prepared for a technical breakout that would carry them 20% higher over a 30-trading-day period.
The combination of intermediate- and short-term technicals suggests that we’re on the cusp of another 20% rally for gold and the GLD shares that will ultimately target a top in both near or after the elections in November.
How to Profit from gold’s next rally.
For investors the play is simple, position for a 20-40% profit by purchasing the SPDR Golf Shares (GLD) at their current price of $267.00 with a target of $330 or higher over the next 12 months.
For options traders, consider buying longer-term options to leverage the expected move. I personally prefer buying slightly out-of-the-money calls at the $275 strike price using the January 16, 2026 expiration.
Those calls are priced around $1,600 per contract at the time of this writing.
For comparison, a move to half of my target of $330.00 ($300) by August would result in an intrinsic value of $2,500, resulting in a potential profit of 56% compared to profits of around 11% from simply holding the GLD shares to the $300.
A move further to $330 before the January 2026 expiration date would result in a return of 243% for the call option compared to 25% for the buy-and-hold approach using GLD shares.
