If Gold Can't Rally Now, When Can It?
Gold's Crisis Of Confidence
Gold was supposed to thrive in a world of geopolitical tensions, volatility spikes, and macro uncertainty. Instead, it keeps selling off. Momentum is deteriorating, volatility markets are demanding downside protection, and investors are increasingly questioning the safe-haven narrative.
Gold blues
Gold continues to unravel. While CPI sparked a brief bounce, momentum remains extremely weak and the metal is now breaking below the key trend line as of writing.
The 21-day moving average is rapidly approaching the 200-day moving average. While this is a longer-term signal, a bearish cross would hardly be encouraging. After all, the bull market began with the opposite setup: a bullish golden cross.
Source: LSEG Workspace
Oversold
Gold has been more oversold once since the autumn of 2023 (RSI currently at 26.9). Maybe we are due for a short term bounce, but momentum is impressively soggy.
Source: LSEG Workspace
Poor hedge
Gold is not the universal hedge many investors still believe it to be. In fact, gold has been a remarkably poor hedge against volatility spikes. Over recent months, many of the sharpest surges in the VIX have coincided with aggressive selling in gold.
The lesson is simple: don't blindly accept the narrative. When liquidity gets tight and risk assets come under pressure, gold can behave much more like a source of funding than a safe haven.
Source: LSEG Workspace
Confidence cracking
The options market is increasingly agreeing with the bearish price action.
Gold normally trades with an "upside skew" i.e. gold up gold vol up, gold down, gold vol down. The latest sell off has seen vol catch strong bids. Additional color via UBS:
Realized volatility remains well below implied levels, suggesting front-end volatility could unwind sharply if gold manages to stabilize or rally. Meanwhile, skew continues to reprice aggressively. The 1-month risk reversal now favors puts by 3.5 volatility points, up from roughly flat a month ago and just 0.5 vols in favor of puts last week, a clear sign that downside hedging demand is accelerating.
Source: LSEG Workspace
Losing its shine
Gold ETF lost its shine to the latest tech ETF frenzy.
Gold's biggest problem may not be inflation, rates, or geopolitics. It may be competition. Investors have found a new object of desire. As capital floods into AI-linked equities and leveraged products, gold is struggling to attract attention despite one of the most supportive macro backdrops in years.
The most bearish thing about gold is not that it is falling. It is that it is falling despite having every reason to rise.
Source: WGC
Distant
It feels distant talking about a gold squeeze right now. Yet if sentiment stabilizes, systematic buyers could quickly re-enter, a reminder that confidence can return just as quickly as it disappears.
