Gold Remains in Secular Bull Market Amid Correction

The gold market has corrected sharply following its best two-year run in decades. However, experts believe that this correction does not signal the end of the secular bull market. To understand where gold stands today and where it could go next, it's essential to focus on the structural forces driving the secular bull market.

The first pillar supporting the gold market is the potential for a secular bear market in stocks. This trend often precedes significant long-term advances in gold and hard assets. Historically, the biggest gains in these markets have occurred after the end of secular bull markets in equities. The stock market peaked in 1929, while gold stocks peaked eight years later. Stocks then reached their peak again in 1968, followed by a surge in precious metals and hard assets more than 11 years later.

The second pillar is the secular bear market in bonds, which began after COVID-19 and has already started to take shape. This trend initially pushes capital towards equities but ultimately supports gold and other hard assets. However, a prolonged bear market in bonds can undermine stocks, as it did at the end of the 1960s.

The third pillar is the deterioration of U.S. public finances. The secular bear market in bonds feeds directly into this issue because debt problems do not emerge independently from the bond market. To address this problem, Debt to GDP must be reduced, primarily through inflation and growth. Historically, significant changes have occurred when interest payments were high but Debt to GDP was low.

Central Bank demand for gold is also a crucial factor in its price. They see the larger backdrop clearly: rising U.S. debt, a secular bear market in bonds, and a shift towards a more multi-polar world. In response, they are increasing their gold reserves. Central Banks have played an essential role in supporting the gold market during its 2018 and 2022 bottoms.