Gold has gone up over 42% in the TTM. Here's why investing at all-time high might be your best decision of 2024
Should you jump in now or is it too late?
A note from Jack: This is not a paid ad. I NEVER do things like that. I only endorse creators I believe in and NEVER charge any fees or split profits in any way from these Masterclasses.
Gold is blazing past all-time record highs, having crossed the $2,680 mark on Thursday.
We all now face the question:
Should I jump in now or is it too late?
Diving into the Gold market at its highest peak sounds counterintuitive. But these peak moment might also by a key moment to maximizing your returns.
Let talk about why investing in Gold at all-time highs is not only prudent but a strategic move.
Hi! I’m Joe from the Gold Trader…
As a former U.S. Ambassador to Zimbabwe, I saw firsthand how unstable fiat money can be and how fragile modern economies really are.
That’s why I live by the motto:
Forewarned is forearmed.
By diversifying my portfolio with Gold, I’ve not only protected myself if things go south, but I’ve also seen a 52% return in the past year.
In my newsletter, I help smart investors like you make sense of the Gold market. I break down complex global events and technical analysis into simple, actionable insights. Plus, I share easy-to-follow trading strategies that I personally use when trading Gold.
I’m also launching a Telegram channel where I’ll be sharing real-time buy and sell signals for XAU/USD trades - a true Gold mine if you’re looking to start profiting from Gold’s rally.
All-Time Highs Are Misunderstood
The fear of buying at all-time highs is mostly psychological. Because when prices hit their peak, the only direction they can go is down, right?
The data tells a different story.
Historical trends show that reaching an all-time high can be a precursor to further gains rather than an imminent decline.
When a stock or asset reaches an all-time high, it’s often breaking through long-standing resistance levels. If the breakout is backed by strong volume and solid macroeconomic conditions, it typically signals the beginning of an even larger price movement, not the end.
How frequent are market corrections following all-time highs (based on S&P 500 performance):
Gold’s historical performance reinforces this perspective.
The precious metal has repeatedly demonstrated resilience and continued growth after breaking all-time highs. During periods of economic uncertainty, liquidity needs increase, and counterparty risk intensifies, driving investors toward safe-haven assets. This behavioral shift often propels Gold prices higher, even after they have reached record levels.
The key is understanding why these highs are happening and whether they signal a short-lived optimism or the start of a broader trend.
And here’s where we have to look at the macros.
The Macroeconomic Picture: Why the Conditions Are Ideal For Gold
Gold’s upward journey over the past few years has been spectacular. After a slight decline during the middle of the pandemic, Gold started climbing again, reaching all-time highs above $2,650 an ounce.
The technical picture is clear: the price has broken out of multiple consolidation patterns, signaling more upside ahead.
When we look at a historical Gold chart, such breakout formations usually indicate strength and sustained bullish momentum. And even though Gold may not move in a straight line, the trend is undeniably bullish.
But the real question is, why is Gold surging right now, and will this continue?
When Gold hits all-time highs, it’s usually a signal of deeper macroeconomic forces at play—such as inflation, currency devaluation, or geopolitical instability.
And luckily for Gold, they’re all aligning perfectly right now.
The global economy is teetering on the edge of a recession, with the yield curve inverted. Historically, Gold performs well during recessions and acts as a hedge in these uncertain times, and new highs often suggest that investors are bracing for more long-term risk.
Next, we’ve got the expectation of further monetary policy loosening. The Dot Plot chart suggested an additional 150 bps of rate cuts for this year and the next. If other central banks follow suit and start cutting interest rates in response to economic slowdowns, the opportunity cost of holding Gold decreases. Lower rates usually mean weaker currencies, especially the U.S. dollar, which traditionally boosts Gold prices.
And let’s not forget about inflation. Gold thrives in inflationary environments because it serves as a store of value. With real interest rates (interest rates adjusted for inflation) still negative or near zero, Gold becomes an attractive asset for preserving purchasing power.
Even if inflation isn’t skyrocketing, central banks have a long way to go in getting it under control.
The Crucial Link: Gold, Liquidity, and Counterparty Risk
When we zoom out and look at the long-term factors that drive the price of Gold besides inflation and interest rates, two key concepts emerge:
liquidity
counterparty risk.
These are crucial in understanding why Gold behaves the way it does, particularly during financial crises or periods of heightened market stress.
What Is Counterparty Risk and Why It Matters for Gold
Counterparty risk refers to the possibility that the other party in a financial transaction (such as a bank, institution, or broker) may default on their obligations. This risk is most prevalent in complex financial systems, especially when leverage is high, or institutions are interconnected.
In such scenarios, a failure at one point in the system can cascade through the entire financial network, as we saw during the Global Financial Crisis (GFC) in 2008.
Gold stands out as an asset that carries zero counterparty risk.
When you own physical Gold or certain Gold-backed assets, you don't rely on a third party to honor a contract.
This is in stark contrast to most other financial instruments like stocks, bonds, or even fiat currencies, which depend on the stability and solvency of issuing institutions.
This unique feature makes Gold particularly attractive during times of financial turmoil when counterparty risk spikes.
How Liquidity Ties Into the Equation
Liquidity refers to the ability to buy or sell an asset without significantly affecting its price.
In a functioning market, liquidity is abundant, allowing assets to be easily traded. However, during financial stress, liquidity often dries up, and markets can freeze, as participants scramble for cash.
During such liquidity crises, assets like Gold tend to perform well because they are among the most liquid investments.
In fact, Gold is often one of the first assets that institutions sell during a liquidity crunch because it's easy to sell and has no counterparty risk.
This was evident in both the GFC of 2008 and the COVID-19 market crash in March 2020, where we initially saw a rapid decline in Gold prices as institutional investors sold gold to cover margin calls or raise cash.
But soon after, Gold rebounded sharply as its safe-haven properties came back into focus once the liquidity scramble subsided.
Historical Examples of Liquidity and Counterparty Risk Affecting Gold Prices
Historically, when counterparty risk rises—whether due to financial crises, recessions, or instability in the banking system—Gold has performed well.
Let’s look at 3 most prominent examples:
#1 The Dot-Com Bust (2000–2002)
In the wake of the dot-com bubble, stock markets suffered severe losses, and trust in high-flying tech companies evaporated.
Counterparty risk in the broader economy was lower during this period, but liquidity concerns were rising as markets adjusted to the crash.
Gold prices, which had been largely flat in the 1990s, began to rise steadily starting in 2001, climbing from around $250 per ounce to $350 by 2003.
This slow but steady rise was driven by investors seeking safer, more liquid assets as the tech bubble burst and equity valuations collapsed.
#2 Global Financial Crisis (2008–2009)
In the early stages of the crisis, particularly after Lehman Brothers collapsed in September 2008, Gold initially dropped from around $900 to $700 per ounce. This decline happened as institutions sold Gold to cover other losses, leading to a temporary dip in price.
However, as the crisis deepened and the Federal Reserve began injecting liquidity into the system through massive quantitative easing (QE) programs, the perception of counterparty risk across the financial system skyrocketed.
Investors rushed into Gold as a safe haven.
By the end of 2009, Gold prices had surged back to around $1,100 per ounce, continuing their ascent to over $1,900 by 2011. During this period, Gold’s price increase mirrored rising fears of insolvency in the financial system and the diminishing trust in fiat currencies due to aggressive monetary policies.
#3 COVID-19 Pandemic (2020)
The initial shock of the COVID-19 pandemic in March 2020 led to a liquidity crisis reminiscent of 2008. Stocks, bonds, and even Gold were sold off in the rush to raise cash.
Gold dropped from around $1,700 per ounce to $1,450 during the height of the market sell-off. But just as we saw in 2008, once the initial liquidity scramble subsided, Gold’s role as a safe haven reasserted itself.
By August 2020, Gold reached an all-time high of over $2,070 per ounce.
The combination of massive fiscal stimulus, unprecedented monetary easing, and increasing fears of long-term economic instability made Gold a go-to asset for investors seeking liquidity without counterparty risk.
Why Liquidity and Counterparty Risk Are Even More Important Today
In today's economic environment, both liquidity and counterparty risk are at the forefront of investor concerns.
The global economy is more leveraged than ever before. Corporate debt, government deficits, and consumer credit are all at record highs.
→ We are living in an era where financial systems are increasingly interconnected, making the entire global economy more vulnerable to shocks. Events like the collapse of major financial institutions, sovereign debt crises, or even cyber-attacks could dramatically increase counterparty risk, pushing investors into Gold.
→ Despite the current abundance of liquidity due to central bank interventions, this could change quickly. Rising interest rates, inflation, or sudden geopolitical events could cause liquidity to dry up fast. Gold, being one of the most liquid assets in times of financial stress, would likely see a surge in demand.
→ Central banks may be forced into more rounds of QE to deal with future economic downturns, leading to long-term debasement of currencies. The more money that is printed, the more attractive Gold becomes as a store of value and hedge against fiat currency devaluation. This was a major factor in the rise of Gold post-2008, and it's likely to play out again.
To Sum It Up: All-Time Highs Are the Smartest Entry Point
The idea that all-time highs are a dangerous entry point is a myth.
In reality, these highs often signal the start of even larger moves, especially when driven by strong macroeconomic and technical factors.
The current all-time highs offer a unique opportunity to position yourself for long-term gains.
The key is understanding the why behind these highs and recognizing that, in many cases, they’re just the beginning of a much larger trend.
Gold is poised to continue higher in today’s economic landscape, and investing at these levels could be one of the best decisions you make.
Safe trading,
and remember: All that glitters is not Gold,
Joe
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