For the first time, gold’s inflation-adjusted price has surpassed its 1980 peak, climbing to an extraordinary $3,245.42 per ounce. Coupled with record extremes in the gold-oil ratio at forty times and the gold-silver ratio at ninety-five times, warnings of a potential bubble are beginning to proliferate among experts in the commodities space.

While gold’s rise might seem like an opulent triumph on the surface, advisors and market participants must remain wary of the underlying indicators pointing to a market imbalance and the risks of capital drawdowns. This article unpacks key technical indicators, expert opinions, and actionable steps to help you protect your portfolio amidst growing bubble warnings.

Breaking Down the Technicals

Analysing gold’s record-setting highs reveals areas for concern in technical metrics, often used to signal overheating markets.

Relative Strength Index (RSI)

The RSI is a momentum oscillator that measures the magnitude and frequency of recent price changes. When the RSI exceeds 70, it is typically regarded as an indication of overbought conditions. Currently, gold’s RSI stands above 80 across daily and weekly charts, indicating a potential overheating of the market.

Volume Spikes

Unusually large trading volumes often accompany periods of mania in asset prices. Recent weeks have seen abnormally high volume in gold futures contracts, with nearly double the average daily trading volume of the past six months. Such volume surges suggest heightened speculative interest.

Positioning Metrics

COT data reveals that non-commercial speculative positions in gold have ballooned to multi-year highs. Net long positions by speculators are at levels comparable to the peak seen in August 2020, which itself preceded a sharp correction.

What the Experts Are Saying

To gauge whether gold’s surge is truly a bubble, we consulted two leading commodity strategists for their insights.

Expert 1: “Indicators Reflect Bubble Characteristics”

James Mallory, Senior Commodities Strategist at Apex Markets, identifies clear parallels between gold’s current rally and past bubbles. “The combination of extreme RSI levels, record positioning, and aggressive volume spikes fits the characteristics of asset bubbles we have observed historically,” he explains.

Expert 2: “Gold-Silver Ratio Signals Imbalance”

Amelia Chen, Chief Commodities Analyst at Pacific Strategies, points to the gold-silver ratio as a flashing warning sign. “The gold-silver ratio at ninety-five times is far above its historical norm and indicates significant capital has flowed disproportionately into gold,” she says.

Actionable Tips for Advisors

While the allure of gold’s historic highs is undeniable, portfolio management requires diversification and preparation for a potential pullback.

1. Trim Gold Allocation, Explore Platinum or Copper

Given gold’s extreme RSI levels and unsustainable price ratios, trimming an over-allocated gold position can help reduce risk. Consider reallocating part of that capital to precious metals like platinum or industrial metals like copper.

2. Consider Base Metal ETFs

For a diversified approach, invest in base metal ETFs, which provide exposure to industrial metals poised to benefit from global infrastructure projects and electrification trends. ETFs like Global X Copper Miners ETF or SPDR S&P Metals and Mining ETF spread risk across multiple holdings.

Why Subscribers Have the Edge

At Advisor’s Gateway, we offer exclusive bubble monitor dashboards that track key asset bubbles and provide early warning signals. By staying one step ahead, you can mitigate risks before they impact your portfolio.

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