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Gold has a history of testing investors’ expectations. Even when headlines appear supportive—rising inflation, escalating geopolitical risk and doubts about fiat currency—gold can move in the opposite direction, frustrating many investors. For contrarian investors, however, such reversals can also create opportunity.
Gold is down about 25% from its all-time high set at the end of January. The article attributes the decline less to long-term fundamentals and more to short-term market positioning and interest-rate expectations.
One key driver is the expectation that the Federal Reserve may need to keep rates higher for longer, or even consider additional tightening, if energy-driven inflation continues to rise. May’s consumer price index (CPI) came in at 4.2% year-over-year, the highest reading in over three years.
When investors expect rates to remain elevated, yields become more competitive with gold, which pays no income. That dynamic can pressure bullion in the short term even if the long-term case remains intact.
The article also points to liquidity conditions. During periods of market stress, investors may sell what they can rather than what they want—such as to cover margin calls, rebalance portfolios, or rotate into assets viewed as offering more immediate protection.
Despite the recent weakness, the article argues the longer-term case for gold is still supported by several factors:
The article cites a 60-day percentage change oscillator for gold, measured daily over the past five years, showing the metal has moved deep into oversold territory. Historically, readings near the lower bands have been associated with liquidation and negative sentiment, but also with periods when investors should pay closer attention.
On a standard deviation basis, the current move suggests selling pressure may have gone too far, too fast—improving the historical odds of a substantial bounce.
Gold is not the only hard asset highlighted. The article points to supply constraints across commodities, using aluminum and copper as examples.
Aluminum: The Midwest Premium has become a growing share of the all-in U.S. aluminum price, reflecting regional tightness and higher costs to secure physical supply. Aluminum is described as trading around $3,500 per metric ton, but with the premium included, U.S. buyers are paying over $6,000, according to the Wall Street Journal. The article notes this can affect costs across sectors including cars, aircraft, defense systems and infrastructure.
Copper: The article describes copper as central to electrification and infrastructure, including power grids, data centers, defense applications and industrial growth. It also notes that Fitch raised near-term metals and mining price assumptions, including:
The article links these assumptions to market signals such as constrained supply growth, difficult permitting, tight inventories and geopolitical risk.
For gold, the article highlights three factors:
The article concludes that gold appears oversold at a time when the broader hard-asset case remains strong. It argues that this combination may be worth consideration for contrarian investors, reiterating a long-held view that investors should consider a 10% weighting in gold and gold-related assets—split between 5% in physical gold or bullion-backed exposure and 5% in high-quality gold mining equities.
Coinbase has launched a High Yield USDC vault within its in-app DeFi lending offering, adding a second lending option that provides exposure to a wider range of collateral assets. The product is powered by Morpho infrastructure and uses vault allocations curated by Steakhouse Financial.
