Investors should prepare to buy Gold (XAU) between late September and mid-October as it forms a key seasonal bottom around current $4,400 levels.

Following historical patterns from the 1974 analog, this setup could trigger a roughly 50% rally to new all-time highs by year-end, keeping the broader secular bull market on track through mid-2027.

Near-term upward momentum in the US Dollar Index (DXY) from 98.6 may create short-term volatility as markets absorb potential Federal Reserve rate hikes.

Exercise caution with the S&P 500 (SPX) through early October, as broader equities are likely to face seasonal weakness and lag behind Gold during the initial market rebound.

Gold (XAU)

• Gold is currently trading around $4,400 and is navigating a typical midterm election year cycle.
  • Midterm years historically feature a drop into the summer with an average low around July 6; gold followed this pattern with a summer bottom during the week of June 29.
  • The price held near the Gold Bull Market Support Band (comprising the 20-month SMA and 21-month EMA), which typically acts as a key support zone during secular bull markets.
• Current price behavior closely mirrors the 1974 market analog:
  • In 1974, gold experienced an early-year top, dropped nearly 30% into a July low, set a higher low around late September, and rallied roughly 50% to new all-time highs before year-end.
  • A higher low is anticipated to form between late September and mid-October.
• Recent price weakness is largely attributed to gold pricing in forward-looking strength in the US Dollar and potential interest rate hikes by the Federal Reserve.
• Risk and timeline check: If gold fails to achieve new all-time highs by mid-2027, the secular bull market thesis would need to be reassessed against potential multi-year consolidation patterns (such as 2011).

Takeaways

• Look for a potential seasonal bottom or higher low to form between late September and mid-October before a possible year-end bounce.
• Monitor price action relative to the bull market support band; as long as it holds above recent summer lows, the medium-term outlook remains constructive toward mid-2027.

US Dollar Index (DXY)

• The US Dollar Index is currently trading at 98.6, where it appears to be forming a technical higher low.
  • The dollar's trajectory is reflecting patterns seen in 2018, where an initial correction was followed by an aggressive upward move.
• Upside pressure on the dollar is expected due to persistent inflation and the likelihood that the Federal Reserve may need to raise interest rates to manage the long end of the yield curve.
• Gold often prices in dollar rallies ahead of time, meaning dollar strength could peak or normalize after the market fully absorbs monetary policy expectations.

Takeaways

• Anticipate potential near-term strength in the US Dollar, which could create temporary headwinds for commodities and risk assets until rate hike expectations are fully priced in.

S&P 500 (SPX)

• In historical analogs (such as 1974), broader equities experienced seasonal weakness into early October and lagged gold's recovery.
  • During that cycle, equity markets took longer to establish a meaningful bottom while gold rebounded ahead of the broader market.

Takeaways

• Be prepared for potential seasonal divergence where gold establishes a cycle low slightly ahead of broader equity indexes during early autumn.