I think gold still looks interesting - mainly because Donald Trump is still President. This makes owning treasuries seem unattractive, AND makes it likely he will pressure the Fed. That being said, it is some 25% down from it peak, and squarely in bear market territory.
These days people typically talk about passive investing distorting the market - see Michael Green’s work. Personally, I have found market tends to find a way to make money from distortions. If we look at ETF flows into gold, if it was truly distorting, gold should still be at highs!
That being said, there are two style of “passive” investing that I do think distort the market - factor investing and CTAs. Both these styles are dominated by “robots”, who tend not to really think about what they are doing, but follow “rules”. The rules tend to be pretty self explanatory - and you see them in many big funds like Bridgewater was well. We will just look at gold and factor investing for the time being. Factor investors tend to love gold when the US dollar is weak. So I was bearish gold in 2012, and been bullish since 2022 - in part because this “factor” looked to be turning at both these points. Gold this year peaked at the same time time dollar hit its low.
Gold also tends to do well when US rates are falling - but for me this is much more a secondary consideration. If the US is raising rates, but the US dollar is still falling, expect gold to do very well. That being said, gold also peaked when US 2 year yields were at their lows.
There are lots of different assets and different factors, but for gold these are the key. What I can tell you is that factor based investors robots just move money in and out of assets based on these factors. I am 99% certain factor investors were buying gold in 2025 and early 2026, and now they have become sellers. And should dollar weaken, they will likely become buyers again.
Even dumber investors robots are CTAs. Who are basically momentum investors. If you ask a CTA they will tell you they are not a momentum investor, but they are. They will probably claim they have “better stops” than anyone else, but this plainly bullshit. CTAs love buying assets going up, and selling assets going down. Typically they use moving averages to determine buying and selling. My guess they went very long gold in early 2024, and are now fully out of gold as of today, and possibly even short selling.
What happens in markets these days - in my view anyway - is that some factor changes (interest rate cut, oil price surges etc) and the factor investors duly move money around. This causes the CTAs to start buying this new trend, and can push as asset like gold up a long way. But then factors change, and the process goes into reverse. As mentioned above, I like gold, mainly because President Trump is still President. What are the chances that he begins to complain about a strong dollar, or interest rates being too high, between now and the end of his term? 90% seems reasonable. Where is market positioning on a weak dollar? Pretty close to max short on Yen.
And also pretty bearish on the Swiss Franc.
Not so bearish on Euro, but still below recent highs.
The funniest thing about all of this, is that even though I am looking at Euro, Yen and Swiss franc - there is one currency above all that should be linked to the price of gold - and that is the Chinese Yuan. For me a strong Yuan tends to imply a strong gold price. Chinese Yuan has been conspicuously strong.
I find it really hard to be negative on passive ETFs that buy and hold indices - its an efficient way to hold an asset that is designed to go up over the long term (sorry Michael). But I do find it easy to be negative on passive “rules based” investors like factoring investing and CTAs. They are always doing dumb stuff. Basically they seems to have said, “oh dollar has rallied against Yen - sell gold”. When I see Chinese Yuan is still strengthening against the US dollar and has USD 1 trillion trade balance to deploy, and President Trump is still President, I struggle to get bearish gold. CTAs and factor investors are probably short and out of gold, and short Yen and Swiss Franc. Yep - makes no sense to me either - but this has always been the problem with investing using historical data - you are fighting the last war, not this one.
