Gold at Risk of Repeating the 1980 Crash: Analyst Warns of Reversal Risk
Precious metals remain the only commodity sector that has not only grown but also held onto its gains. However, in my assessment, this growth may prove excessive. There is a high probability that gold has already formed a sustainable peak in 2026, and in the second half of the year, we could witness a large-scale trend reversal.
The entire picture of the commodity market fits into a single chart: the precious metals sector is the only one that moved up and stayed there. I would call the other commodity segments "duds" that failed to sustain their momentum. This critical divergence indicates that gold, as a "beta" to metals, has absorbed all the demand. But it is precisely this exclusivity that harbors the main danger.
Why Gold Risks Reversing
The key signal is the formation of a large "red" annual candle after a record near $5,500 per ounce in the first quarter. Such a candle is a classic harbinger of a downward reversal following an extreme rally. The last time we saw such a premium for gold relative to the broad commodity index was in 1980. That was followed by a prolonged and painful decline that lasted for years.
The critical difference between the current situation and 1980 is the inflationary backdrop. Today's macroeconomic conditions, despite all their instability, are fundamentally different from those four decades ago. This increases the risk of gold prices normalizing relative to other commodities. In other words, the "gold bubble" could burst faster and with more serious consequences than many expect.
Commodities vs. Stock Market: A Zero-Sum Game
The relationship between commodities and the stock market deserves special attention. The surge of the BCOM index to a new high in the first half of the year is likely to be short-lived. The commodity index is near a new low relative to the total return of the S&P 500. It follows that commodities have only one key driver for outperformance: a decline in the stock market itself. This is a classic "lose-lose" situation for the commodity sector: either stocks continue to rise, and commodities lag, or they fall, dragging all risk assets down with them.
Currently, the precious metal has significantly diverged from other commodities. The coming months will be a test of the strength of this gap. I believe the current market configuration is extremely unstable, and investors should prepare for high volatility. If the history of 1980 repeats itself, we will see not just a correction but a change in the multi-year trend. Keep your finger on the pulse — the market is entering a dangerous zone.