Gold bulls have no choice but to push

Gold's rally to record highs above $4,300 per ounce resulted from a debasement trade. Governments cannot cope with budget deficits, are accumulating debt and demanding that central banks cut interest rates, as in the US, or keep them low, as in Japan. As a result, investors are losing confidence in government bonds and currencies. They are looking for alternatives and turning their attention to precious metals.

As a result, gold has been gaining for the last nine weeks, the fifth time in the history of free currency conversion since the 1970s. However, there has never been a 10-week consecutive growth period. The gap from the 200-week moving average also shows the excessiveness of the rally. The spot price at its peak exceeded this line by 90%. There has only been one larger gap once before, in 1980. At the very least, the market needs a technical respite. But historically, its beginning could be the start of a significant multi-year reversal. Now, we are on the side of the bears, but at the same time, we understand that the bulls simply have no choice but to push the price further up, as stopping would ruin the whole game.

Each time, gold finds a new driver of growth. In the summer, there were expectations of a resumption of the Fed's easing cycle; during September and so far in October, there were political crises in Japan and France, the US shutdown, and the renewed US-China trade war. In November, it will be the turn of the British budget and the court case over Donald Trump's tariffs. Against this background, Societe Générale’s forecast of precious metal growth to $5,000 per ounce by the end of 2026 seems justified. The company is betting on a consistently high capital inflow into ETFs, a strong appetite for bullion among central banks, and a loosening of the Fed's monetary policy.