Is Gold going to Crash | louisinvests

Is all that Glitters Gold?

Gold is having a phenomenal year, with it rallying 41.71% year to date. While in some regards this seems to make a lot of sense given the geopolitical uncertainty, its high target set by JP Morgan analysts of 4,000 for mid 2026 does seem a tad dramatic. In this article, I, Louis, an enthusiastic, 20 year old holder of gold will lay out my thoughts.

Gold’s price is largely dependent on a variety of factors, which have all converged at the perfect time to help it outperform the broader index. The first—and arguably most persistent—of these is political uncertainty. History has shown that such instability directly benefits gold, as it’s viewed as a safe haven by investors. This uncertainty has been present since the start of the Russian invasion, and was also evident during President Trump’s tariff announcements in early August, when the VIX hit its highest level since the COVID-19 pandemic, surging to 60.1, Volatility has since cooled, but remains elevated compared to historical norms.

This level of volatility is almost certain to persist throughout the remainder of his presidency, as it did during his first term—when gold was buoyed by political drama involving North Korea and trade disputes with China. Those trade tensions are likely to escalate before they improve. The Supreme Court is currently reviewing the legality of the tariffs, with a fast-tracked decision expected in September.

Gold is also enjoying the downfall of the US dollar, as other Central Banks seek to diversify away from the currency with large purchases of Gold being made by various central banks. Furthermore the growing popularity of gold ETFs have also contributed to the inflow. This is particularly evident in the 9.5% increase of USA Gold ETF holdings and the 70% increase in Chinese Gold holdings, which does also raises intrigue as to Chinese confidence in their own economy. Furthermore, with more pressure being exerted on the Fed as a result of several revised labour market stats and manufacturing contracting for 5 months in a row, ensuing rate cuts will also benefit the price of Gold.

So the tailwinds for Gold are essentially a global economy that is propped up by an overweight S&P 500, with geopolitical tension unlikely to go anywhere and rate cuts that are inevitable. While this all makes it seem that now is the time to be overweight on gold, history teaches us that when tensions die down the price of gold can suffer as a result. This is demonstrated by the huge dive in gold by 57.24% from 1982 to 1980, as geopolitical tensions and the economy improved. While, another crash on this scale is unlikely, maintaining 5-10% of a portfolio in gold is certainly a sensible strategy at the moment, buying points are also available in between the bouts of Trump news, such as as in the the weeks after the Liberation Day tariffs.

Price of Gold YTD. Pretty good going so far.