GOLD - How high can it go?
GOLD has been experiencing strong price action for a while now. As the rally continues, it raises the question of how much further GOLD can go and what kind of signs might be indicative of a potential temporary top. By analyzing GOLD's price action through the lens of the other assets and the global money supply, it is possible to speculate about potential paths GOLD could take.
GOLD Price Action
GOLD's recent performance has been exceptionally strong, recently touching the 5300 USD mark. This level represents a significant milestone, being a 22% gain from its previous all-time high. While reaching 5300 fulfills a "lower possible target," the question remains whether this is a local top or just a pit stop on the way to higher levels. While it is possible that GOLD could stall out at this level for some time, it is uncertain that it will and it could also continue its rally higher without a potential consolidation phase.
GOLD vs other assets
When measured against the M2 money supply, GOLD/M2 can provide insight into where the current price of GOLD is relative to the rest of the money supply. Currently, the GOLD/M2 ratio is approaching a resistance area. While it hasn't quite hit the ceiling of this zone yet, it is close enough to warrant caution. A move to the upper end of this resistance could lead to a potential top in GOLD and be a potential selling opportunity in the short term, though it is not guaranteed that it will go as high, or maybe even go higher than the resistance area would suggest.
In contrast to the M2 ratio, the GOLD vs S&P 500 (SPX) ratio indicates that there may still be room for outperformance. The ratio has not yet reached the 0.5 Fibonacci retracement level. This suggests that relative to the SPX, GOLD may still have an upward path to travel before it hits major technical resistance. It could potentially also reach higher during the current rally and touch the 0.618 level, though whether this will happen remains to be seen in the coming weeks.
SILVER/GOLD has nearly hit the upper end of the descending channel. While this ratio could still reach a little bit higher, it is fairly extended already. The scenario exists, where SILVER/GOLD breaks this descending channel, though it might prove as strong resistance since this channel formed in 1980.
Historical data shows that when this ratio hits this resistance, it often coincides with a top in the price of GOLD itself—occurring in two out of the last three instances. This makes the SILVER/GOLD ratio an interesting metric to watch for signs of a broader sector reversal. Whether GOLD experiences a local top again in early 2026 remains to be seen. 2 out of 3 data points are certainly not enough to confidently proclaim a trend. This observation serves as a potential indicator for a top in GOLD, though other metrics should be taken into account to find confluence, before jumping to any conclusions.
GOLD RSI and SRSI
Looking at momentum, the RSI and SRSI both suggest that the rally is not yet fully exhausted. Since 2024, in bullish phases, the SRSI has consistently moved above the 80 level after a decline to the 20 level. With current levels still showing room to climb, the momentum indicators support the possibility of further price appreciation before a significant cool-off period occurs. Also, while the RSI is certainly already overbought by definition, it might hit the horizontal trendline at around 85 again which would correspond to a double top on the RSI for GOLD. This is not guaranteed to happen, but if it happens, a good selling opportunity could present itself.
Conclusion
GOLD has reached an important milestone at 5300, but the technical picture remains mixed yet largely supportive of some further upside. While the GOLD/M2 and SILVER/GOLD ratios are nearing resistance levels that have historically signaled caution, the GOLD/SPX ratio as well as the RSI and SRSI suggest the rally could go on for a little bit longer. It remains to be seen where GOLD ultimately finds at least a temporary top, and based on the analysis, these levels could be reached relatively soon or might have been reached already.
Pitfalls
Keep in mind that this is a dubious speculation that may or may not occur. GOLD might be more bullish than the analysis of the article or more bearish depending on how market sentiment evolves in the future. Indicators do not tell the future with absolute certainty. They are useful to reason about the future, and it is important to balance both bullish and bearish scenarios to avoid bias as best as possible. Lastly, all indicators are prone to failure every now and then. They tend to work well for a while, but eventually, some indicators fail, while others do not at a given time. As more data comes in, the analysis will evolve to incorporate new moves, invalidate a previous hypothesis or gain evidence for a previous idea.
In this analysis, the GOLD/SPX ratio was examined as well as other ratios. While this is helpful to understand how an individual asset performs against something else, the interpretation of GOLD/SPX allows for multiple scenarios to occur. Since GOLD and SPX are moving too, the final outcome of GOLD itself and the path it takes are influenced.
For an approximately constant SPX price, GOLD/SPX could go lower, because GOLD is underperforming SPX (dropping). If GOLD/SPX goes higher, then GOLD is outperforming SPX by going higher more quickly. Such relative comparisons are tricky at times, and it is important to keep in mind that its interpretation could be more ambiguous. The same is true for M2 and SILVER comparisons.
Enjoyed this analysis? Follow me on TradingView for more real-time market insights and technical analysis.
Important Reminder
This article is for educational and entertainment purposes only and is not financial advice. Always consult with a qualified financial advisor before making investment decisions, and only invest what you can afford to lose.
