Gold on the verge of repeating the 1980 scenario: analysts warn of reversal risk
Precious metals remain the only commodity sector that has not only grown but also held its gains. However, it is precisely this fact that is now causing the greatest concern. The market is moving along a dangerous trajectory, reminiscent of events more than four decades ago. If the current trend is confirmed, gold could record a sustained peak as early as 2026, followed by a prolonged correction period.
Why Gold Risks Reversing
My analysis shows that gold acts as the "beta" for the entire commodity sector—its dynamics set the tone for other metals. After a record rally to around $5,500 per ounce in the first quarter, a massive "red" annual candle has formed on the chart. Such a candle is a classic technical signal indicating a reversal after extreme growth. The last time such a premium of gold relative to the broad commodity index was observed was in 1980, and it was followed by a multi-year decline.
The key difference between today's situation and 1980 is the inflation context. Current macroeconomic conditions, although different from those four decades ago, create an elevated risk of gold price normalization. In other words, the premium that investors are pricing into the precious metal may prove excessive.
Commodities in Opposition to the Stock Market
The relationship between commodities and the stock market deserves special attention. The BCOM (Bloomberg Commodity Index) is hovering near new lows relative to the total return of the S&P 500 index. This means that the commodity sector has only one trigger left for outperformance—a decline in the stock market itself.
This configuration creates a "lose-lose" situation for commodities: either the stock market continues to rise, and commodities lag behind, or it falls, dragging all risk assets down with it. The difference from a similar situation in 2000 is the dominant dynamics of gold, which has significantly diverged from other commodities. It is this gap that will become the main test of sustainability in the coming months.
My professional opinion: Investors should closely monitor the ratio of gold to the broad commodity index. If the historical scenario repeats, current levels could prove to be a zone for forming a long-term top. Diversification and partial profit-taking in precious metals appear more than justified amid growing risks.