Gold risks repeating the 1980 scenario: analysis of peak and reversal risks
Precious metals remain the only commodity sector that has not only grown but also held its ground. However, based on my assessment of macroeconomic indicators, gold may be overheated. There is a high probability that the market has already formed a sustainable peak in 2026, and in the second half of the year we could witness a trend reversal.
The key signal is the anomalous divergence of gold's dynamics from other commodities. While the broad Bloomberg Commodity Index (BCOM) shows only local spikes, precious metals have surged steeply, forming a "red" annual candle after a record near $5,500 per ounce in the first quarter. This configuration on the chart is a classic sign of an exhausted upward impulse and a precursor to a correction.
Parallels with 1980: Lessons from History
The last time we saw such a premium for gold relative to the broad commodity index was in 1980. That sharp peak was followed by a prolonged and deep decline. The key difference in the current cycle is the inflationary environment. In 1980, inflation was double-digit and aggressively suppressed by monetary authorities. Today, despite a slowdown, inflation expectations remain high, creating an additional risk of gold prices normalizing relative to other assets.
In other words, while the fall in gold in 1980 was triggered by the Fed's tight policy, the market itself is now signaling an imbalance. Gold has detached from fundamental factors such as industrial demand and dollar dynamics, turning into a pure risk-hedging instrument. But every hedge comes at a cost, and the current premium appears excessive.
Commodities vs. Stock Market: A Zero-Sum Game
The relationship between the BCOM commodity index and the stock market deserves special attention. The BCOM index is near an all-time low relative to the total return of the S&P 500. This means that commodities have only one scenario for outperformance—a decline in the stock market itself. This configuration creates a "lose-lose" situation: either the stock market continues to rise and commodities lag, or it falls, dragging down all risk assets, including gold.
Unlike in 2000, when commodities had their own driving force in the form of Chinese demand, today the sector's only hope lies in a stock market crash. This is an extremely vulnerable position.
My conclusion: Gold has shown impressive growth, but current levels carry significant risks. The 1980 scenario is not a dogma, but historical parallels and current macroeconomic imbalances point to a high probability of a correction in the second half of the year. Investors should closely monitor the dynamics of the BCOM index and Fed rates—these factors will serve as triggers for a reversal.