Gold Speculative Mania

Gold has soared into a popular speculative mania!  Frenzied momentum-chasing buying fueled by truly-astonishing herd greed has catapulted gold into an extreme danger zone.  Its ludicrous ascent pace in January launched gold to stratospheric nearly-half-century extremes of overboughtness.  Unfortunately market history proves similar irrational-exuberance episodes are followed by violent symmetrical plunges.

Since beginning to study markets and trade way back in high-school, I’ve been a gold enthusiast.  During the past 26 years which is half my life, I’ve been blessed to pursue my passions professionally full-time.  Those include deeply researching market history, trading based on that, and writing financial newsletters about it.  I’ve always advocated every investor have some material gold portfolio allocation, at least 5% to 10%.

My little research company specializes in gold-stock trading.  During the past quarter-century-plus, we’ve recommended and closed 1,621 stock trades in our popular weekly and monthly subscription newsletters.  Nearly all of those have been precious-metals miners and explorers.  Their average annualized realized gains including all losers over this long span is a spectacular +20.4%, double the long-term stock-market average!

My whole professional life has been spent studying markets from a contrarian bent with an emphasis on gold.  So I certainly don’t say lightly that gold is in a dangerous popular speculative mania.  I sure wish this wasn’t the case, as the reckonings after similar extremes historically are brutal.  But unfortunately the tale of the tape is crystal-clear.  I’ve never seen anything like this in my professional lifetime, it is frightening.

Month-to-date in January alone as of the Wednesday data cutoff for this essay, gold has soared 24.9%!  And that’s essentially from record highs, not a deep secular low like a stock-panic bottoming.  Annualizing that ascent, gold is skyrocketing at a ludicrous 346% pace!  Nothing can ever justify such blistering gains in a massive global asset.  Above-ground gold’s world “market capitalization” is estimated to be around $37t!

The last time gold was so extreme was all the way back in early 1980, a notorious bubble with brutal consequences.  Realize gold’s entire history in US-dollar terms effectively began in August 1971.  That was when Richard Nixon tragically severed the dollar from its gold standard, where it had been pegged at $35 per ounce since January 1934.  Before Franklin Roosevelt devalued the dollar, that hard peg was near $21.

Gold’s incredible extremes today can only be understood within the context of its 55.1 years of dollar free-floating history since January 1971.  And nothing like this month has been witnessed since way back in early 1980, which was undisputedly a popular speculative mania.  Thankfully that was way more extreme than today’s, but this is still a popular speculative mania.  Any technical-stretchedness measure proves this.

Markets always face imminent major reversals when they move too far too fast to be sustainable.  The bigger those moves, the bigger the mean reversions and overshoots back the other way.  Studying gold over two decades ago, I developed an overboughtness-oversoldness measure I called Relativity.  It recasts prices as multiples of their baseline 200-day moving averages, revealing when technical extremes are reached.

These 200dmas are ideal to measure how stretched prices are technically.  They aren’t static, gradually evolving to reflect new prevailing price levels.  But they still change slowly enough to show how far how fast prices have moved in hard empirical terms.  Dividing gold’s daily close by its 200dma yields Relative Gold or rGold.  Charting these multiples over time illuminates extremes, which are really profitable to trade.

This latest rGold chart encompassing these past several years or so is jaw-dropping, I’ve never seen anything like it!  Gold is rendered in blue, slaved to the right axis with its key technicals.  Those rGold multiples are shown in red tied to the left axis.  They recast gold prices in constant-percentage terms off their 200dma, which is flattened to horizontal at 1.00x.  January’s insane gold action is a contrarian nightmare.

For my Relativity trading system, extremes are defined based on the last five calendar years of multiples data.  Gold’s current trading band runs from extremely-oversold levels under 0.93x its 200dma up to the opposite extremely-overbought levels above 1.18x.  Gold’s current mighty cyclical bull was born way back in early October 2023 at just $1,820.  Then I was pounding-the-table bullish on gold being a screaming buy!

Gold indeed surged sharply out of those oversold lows, powering 31.2% higher over the next 6.4 months into mid-April 2024.  That left it extremely-overbought, stretched to 1.188x its 200dma.  Gold needed a rebalancing after that to bleed off those extreme technicals and sentiment.  It got one in the form of a high consolidation, a sideways drift giving markets time to digest and normalize gold’s big-and-fast gains into it.

Then gold surged again into late October 2024, extending its bull run to impressive 53.1% gains in 12.9 months.  That already ranked as gold’s 11th-largest cyclical bull since 1971, defined as 10%+ moves higher on a closing basis without any 10%+ selloffs.  That again left gold extremely-overbought by those recent standards, stretched to 1.183x its 200dma.  Then gold again consolidated high without any 10%+ correction.

Gold soon started marching higher again into mid-April 2025, ballooning this monster cyclical bull’s total gains to 88.0% over 18.5 months!  That elevated this bull to gold’s 6th-biggest-ever in dollar terms.  But that surge finally pushed gold into extraordinarily-overbought territory, with an extreme rGold read of 1.266x.  That proved a 13.7-year secular high in overboughtness, the most extreme since August 2011.

That happened to be when another monster bull peaked, the then-8th-largest with 78.3% gains.  That was swiftly followed by a big-and-fast drawdown of 14.9% over just 1.2 months!  Yet last summer gold again defied the odds to consolidate high for the third time in this bull, then resumed powering higher at the end of August.  That massive-breakout surge ran into mid-October, growing gold’s bull to epic proportions.

Then it clocked in at record-shattering 139.1% gains over 24.5 months without a single 10%+ correction!  That usurped gold’s previous biggest cyclical bull soaring 127.9% into January 1980’s bubble peak.  But gold had stretched to an extreme 1.330x its 200dma, the most overbought it had been in 19.5 years since May 2006.  That was when gold’s 6th-biggest bull peaked at 92.3% gains, which was followed by a violent plunge.

Over just 1.1 months after that topping, gold plummeted 21.9%!  When prices rocket too far too fast to be sustainable as evidenced by extreme overboughtness, the subsequent reckonings are proportional with big-and-fast selloffs.  Gold did quickly drop 9.5% into early November 2025, right on the verge of a cyclical-bull-slaying correction.  Yet even from those still-lofty heights, gold miraculously resumed consolidating high.

That record October peak held until late December, when frenzied Chinese buying was increasingly forcing gold higher in brief windows overnight into Mondays.  That’s the only time Chinese markets dominate global pricing with most of the rest of world markets closed.  I wrote a whole essay last week delving into gold’s China takeover.  That China-Monday gold buying sparked and fueled gold’s popular speculative mania.

Even in late December as gold climbed to new record highs, it wasn’t yet in a mania.  Because gold’s 200dma was tilting more vertical normalizing higher price levels, rGold was then running 1.263x which was still extreme yet well under mid-October’s 1.330x.  After that gold largely drifted sideways during the first couple weeks into this young new year, still not too mania-like.  But its last twelve trading days have been crazy!

Big China-Monday buying overnight into January 12th drove gold 1.9% higher that day to another record $4,592 close, the first in over two weeks.  Then overnight into Tuesday the 20th which was effectively a US Monday due to a market holiday, frenzied Chinese momentum chasing catapulted gold another 3.8% higher to $4,760!  Still gold was “merely” stretched to 1.288x its 200dma, still below mid-October’s secular high.

But gold’s biggest up day in 5.8 years and mounting gains spread China’s growing gold speculative mania globally.  Greed soared around the world, with traders rushing in with big fear-of-missing-out gold buying.  Gold’s average daily gains in the seven trading days since are running 2.3%, a terminal ascent pace that would double it every 2.0 months!  Obviously that ain’t gonna happen, nothing can sustain such insane gains.

Gold skyrocketed a mind-boggling 17.4% in that same short seven-trading-day span!  That annualizes to an absurd 623% ascent pace!  As I marveled at that extreme speculative excess, even more shocking was the resulting Relative-Gold level.  This Wednesday gold closed a terrifying 43.4% above its baseline 200-day moving average!  Such crazy-extreme rGold levels hadn’t been witnessed in nearly a half-century.

That was a wild 45.9-year secular high in gold overboughtness, as 1.434x+ levels hadn’t been witnessed since way back in early March 1980!  That was soon after that notorious January-1980 gold bubble burst, a dreadful time for gold.  Heaping popular-speculative-mania worries on top of that, this epic monster gold bull’s gains extended to a stupendous record 196.0% in 27.8 months without suffering a single 10%+ correction!

I was just a little kid during that last gold bubble, but have studied the data and read about it extensively.  In just 2.6 months into that topping, gold skyrocketed a staggering 127.9% which was its largest cyclical bull ever until mid-October 2025.  Gold soared to crazier extremes then, stretching way up to 2.387x its 200dma which was its most-overbought ever by far!  That popular speculative mania’s reckoning was brutal.

Over the next 1.9 months into mid-March, gold cratered 43.4%!  A similar 40% plummeting from mid-week levels would crush gold way down to $3,231.  Even worse, gold’s $850 peak in January 1980 wasn’t exceeded even in nominal terms until 28.0 years later in early January 2008!  So succumbing to extreme herd greed to buy super-high in gold’s last popular speculative mania was the worst-possible time to deploy capital.

Since today’s next one is way-less extreme, gold shouldn’t have to suffer that miserable a drawdown.  In the terminal three, two, and one months into January 1980’s peak, gold skyrocketed 116.3%, 117.9%, and 73.9%!  Thankfully gold’s gains in the three, two, and one months into this Wednesday are far milder at 34.8%, 30.4%, and 18.9%.  So this popular speculative mania is still a baby one compared to January 1980’s.

Nevertheless, gold’s most-extreme overboughtness by far since then still demands some kind of violent symmetrical reckoning.  Neither extreme technicals nor extreme herd greed are ever sustainable for long.  They soon attract in all-available-and-willing near-term buyers.  Once their capital firepower for buying is exhausted, those near-vertical surges fail spectacularly as sellers gain the upper-hand which is looming today.

Since January 1971, only four cyclical bulls crested at higher Relative Gold levels than this week’s.  Those climaxes were in January 1980 of course, June 1973, October 1979, and April 1974.  Those were respectively followed by serious big-and-fast plunges of 43.4% in 1.9 months, 28.5% in 5.5 months, 12.5% in 1.0 months, and 25.3% in 3.1 months.  Those averaged savage selloffs of 27.4% in just 2.9 months!

Excluding January 1980’s far-more-extreme bubble, those other three crazy-overbought gold-bull toppings soon suffered average selloffs of 22.1% over 3.2 months.  And again the last time gold was nearly this overbought in May 2006, it plummeted 21.9% in just 1.1 months.  No one knows where this popular speculative mania will climax, but it would be shocking not to see a 20%+ gold plunge in a few months after.

Based on Wednesday’s latest record close, a 20% drawdown would hammer gold to $4,308.  I wouldn’t be surprised at all to see 30% out of this insane 45.9-year high in overboughtness, which would be $3,770.  Such necessary rebalancing selloffs would be hard to weather, but not catastrophic.  The real worry when this popular speculative mania inevitably cracks and rolls over hard is how silver and gold stocks fare.

The white metal’s popular speculative mania is way more extreme than the yellow one’s.  Relative Silver skyrocketed to 2.443x Wednesday, levels only exceeded for several weeks leading into its own January-1980 bubble peak!  Silver’s latest three-, two-, and one-month gains are a ridiculous 149.0%, 126.4%, and 48.2%!  Silver leverages material gold moves, often about doubling them.  That’s a dreadfully-ill omen for it.

If gold soon plunges 20% to 30%, silver would likely collapse 40% to 60%!  After its January 1980 topping, silver crashed 76.9% in just 2.2 months amplifying gold’s 43.4% plummeting by 1.8x!  And the major gold stocks dominating their leading GDX ETF usually amplify material gold moves by 2x to 3x.  So a 20%-to-30% gold reckoning would translate into 40% to 90% losses in gold stocks!  They’d likely be cut in half.

Chasing popular speculative manias to buy super-high is the height of trading folly.  Extreme gains and extreme herd greed go hand-in-hand, fueling each other.  They are deadly traps enticing in naive traders who don’t sufficiently understand market history.  They get caught up in mania hype, rushing to chase extreme mania gains over fear of missing out.  But when manias soon fail, those traders are quickly gutted.

Since extreme technicals relative to history are impossible to refute, a key hallmark of popular speculative manias is widespread use of fundamental arguments attempting to rationalize buying super-high.  Recent ones are nothing new, they’ve existed through gold’s entire epic monster bull of recent years.  No bullish fundamentals can ever justify mania-magnitude price gains, underlying supply and demand can’t shift that fast.

Another telltale mania warning sign is claims this time it’s different, the most-dangerous words in market history!  It’s never different, because popular-speculative-mania extremes are driven by greed in human hearts which never changes.  Nor does herd behavior which leads to “Extraordinary Popular Delusions and the Madness of Crowds”, the title of Charles Mackay’s famous and awesome 1841 book on bubbles.

If anyone is telling you gold’s bull is just beginning after a tripling in a couple years, they are liars or fools.  If anyone is spurring you on to chase gold’s gains and buy way up here, I’d encourage you to check out their track record at past known major gold toppings and bottomings.  If they weren’t publicly hardcore contrarian at these key reversals, there’s no reason to assume they know what they’re talking about today!

Examples include this record cyclical bull’s birth in early October 2023, gold’s 6.1-year secular low in December 2015 ushering in more cyclical bulls, and three monster cyclical bulls topping in August 2011, March 2008, and May 2006.  All 1,211 weekly web essays I’ve written since 2000 remain freely available on our website.  How analysts called past major gold toppings and bottomings in real-time is crucial to their credibility!

At incredible market extremes as defined by history, traders have to be contrarians to resist overpowering-and-wrong herd groupthink!  This fighting-the-crowd mindset reminds me of something Jesus said, “Enter through the narrow gate.  For wide is the gate and broad is the road that leads to destruction, and many enter through it.  But small is the gate and narrow the road that leads to life, and only a few find it.”

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The bottom line is gold has soared into a dangerous popular speculative mania.  Gold’s recent ascent pace is absurd and wildly-unsustainable, driving its most-extreme overboughtness since January 1980’s notorious bubble.  That sure didn’t end well for gold, nor did the handful of bull toppings where it was more overbought way back in the 1970s.  Extreme technicals and herd sentiment portend imminent reckonings.

These have proven big-and-fast selloffs on the order of 20% to 30%, which are necessary to rebalance away mania extremes.  While brutal-enough for gold, silver and gold stocks really amplify its big losses catastrophically cratering.  Popular speculative manias never last long, their frenzied fear-of-missing-out chasing buying soon burning itself out.  The subsequent big symmetrical selloffs are violent and unforgiving.

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