Analyst expects gold to fall off the ‘Wall of Worry’

Analyst Expects Gold to Fall off the ‘Wall of Worry’

Investors have been climbing the proverbial wall of worry to new record highs on the stock market this year, fearful with each step that the market is about to have a reversal. Meanwhile, gold’s move to record highs has been far more impressive, and buyers seem to have no worry that the end of their rally is in sight.

Stocks, as measured by the Standard & Poor’s 500, were up roughly 9.4% through August 8 – though they were up nearly 28% since the market bottom on April 9, the day when President Donald Trump paused tariffs just days after announcing them.

Meanwhile, gold has soared by 29.5% this year, through August 8, standing at roughly $3,460 an ounce. Its gain since the post-tariff announcement low is roughly 18%, but gold also didn’t suffer as much as stocks in the meltdown that accompanied the tariff news.

The three-year annualized average return on gold, as measured by SPDR Gold Shares (GLD), is 23.4%, well above its historic averages; from 1971 to 2024, the annualized return on the shiny stuff was just under 8%.

Gold’s rise hasn’t been as a result of its traditional role as a hedge against inflation, because it normally takes a protracted time period with prices rising by more than 5% for gold to kick in that way. Instead, gold has been seen as an ideal hedge against geopolitical risk, the fighting in Ukraine and Gaza, the prospect of trade wars coming from the tariffs, and more.

With no end in sight to those problems, plenty of investors have become gold bugs, looking to precious metals for protection and profits in times of uncertainty.

And while buying gold now – or stocks, for that matter – can feel a bit like showing up late to the party, most industry watchers are suggesting that full-steam ahead is more likely than some reversion to the mean.

While there is no shortage of caution and nervousness, there is no widespread call for recession even into 2025. Plenty of market observers saying that rate cuts (whenever they start) and the economic benefits of deregulation – the next big component of President Trump’s economic plan – will offset the headwinds to keep things moving forward, albeit moderately.

And plenty of gold analysts make a case for the gold rally to continue.

“This gold bull market might be a little bit old in the tooth … it started in 2016,” said Thomas Winmill, manager of the Midas Discovery Fund (MIDSX), in an interview on the August 4 edition of “Money Life with Chuck Jaffe.” “It’s up over 300% in those nine years. That has not happened very often. The average bull market for gold is about 53 months, according to my research, and this is over 110, almost twice the normal length.”

Still, Winmill insisted gold is not overpriced: “If you adjust the former high, which was reached back in 1988, for inflation, we’re actually below that high, which inflation-adjusted would be about $3,500 an ounce.”

“The basket of gold stocks represented by the Gold Bugs Index hit a high of 600 in August of 2011 when the gold price hit 1800,” Winmill added, “and that index is well below that now, in the 400 range, about 430. So, on that score, we’ve got 50% to go in gold stocks.”

On the other side of that trade is veteran commodities and futures analyst Carley Garner, senior strategist at DeCarley Trading, who said in an interview from the August 5 edition of “Money Life” that it’s a “sell-the-rallies market in both gold and silver, and the reason I think that is I believe the U.S. The dollar has hit its bottom, according to renowned market analyst Garner, who believes that it will continue its upward trajectory. This shift in the dollar’s value has significant implications for commodities, particularly metals like gold, which Garner describes as currently experiencing unprecedented levels of volatility.

However, Garner warns against blindly investing in gold solely based on its recent price increases. Drawing from her experience during the gold market peak in 2011, she recalls similar narratives surrounding the precious metal at that time, which ultimately led to a 50% drop in gold prices that took nearly a decade to recover from.

Garner cautions that history may repeat itself, and a significant correction in gold prices could be on the horizon. She emphasizes that while she isn’t making specific predictions, she is assessing the probabilities based on market trends and historical patterns.

In addition to her cautious outlook on gold, Garner also expresses concerns about the stock market. She points to a trend line on the S&P 500 futures chart, indicating potential resistance around the 6,000 mark, with limited upside potential in the coming months.

Given her apprehensions about both gold and stocks, Garner reveals that she has significantly allocated her portfolio to Treasury securities. With Treasury yields ranging from 4% to 5%, she sees them as a safer and more lucrative investment compared to stocks in the current market environment.

In conclusion, Garner’s insights suggest a cautious approach to investing in both gold and stocks, with a preference for Treasury securities as a more stable and profitable alternative. By carefully analyzing market trends and historical patterns, investors can make informed decisions to navigate the uncertainties of the financial markets.

This article was originally published on TheStreet on August 10, 2025, and provides valuable insights into the current market conditions and investment strategies.