Author: 0xKyle
Compiled by: Deep Tide TechFlow
Deep Tide Introduction: After months of correction, gold has suddenly broken out, driven by central banks returning as buyers and speculative sentiment being cleared out. This article outlines asymmetric opportunities from both a macro-logic and technical perspective, offering valuable reference for investors focused on safe-haven assets and macro trading.
Note: This article was published to my subscribers on August 9th. Price information and other details may be outdated. Thanks to Cptlightyear and Riff for bringing it to attention—they're awesome. Also, thanks to basedpotato for the charts and some of the viewpoints below.
I spent the weekend doing some due diligence on the gold thesis. Gold bottomed out months ago and then broke out upwards. This article is simply a collection of what I've discovered about gold.
Qualitative Arguments
Cycles are increasingly compressed: 2000-2011: 10 years; 2011-2020: 9 years; 2020-2022: 2 years.
The initial bullish logic has only strengthened over time—after the West froze Russian reserves, countries had to diversify away from developed-market fixed-income securities (especially China). Combined with the US debt issue, no one wants to be a buyer for the country with the world's largest debt—everyone is looking for alternatives. This is a very long-term, broad macro bullish logic.
Add in the Trump corruption era—the Fed is slowly being eroded. Volatility is currently suppressed—Shrub's article aptly notes: Passive money flows plus Claude "Hey, what should I invest in?" plus policymakers manipulating prices (Bessent suppressing paper oil prices) -> Gold is the long-term safe haven.
But why now? Gold peaked in February 2026 at $5300; it has since corrected by 26%, with traders looking for a bottom. Reasons for the correction are varied, but Chinese liquidity, the Iran war, and central banks halting purchases seemed to be the main culprits.
The chart below shows the year-over-year change in the Chinese central bank's net liquidity injections into the Chinese money market, measured daily and smoothed with a 50-day moving average. The key feature is a clear spike on March 2nd. Since then, liquidity acceleration stopped and then contracted.
Daily reverse repos have picked up recently, but it's not clear yet. What is clear is that central banks have started buying again after a Q1 quiet period! (This drop coincided exactly with that.)
Beyond that, these countries (especially China, the big buyer) don't want speculative frenzy in the market. They want to accumulate as much as possible, at as low a price as possible. If the bull-market mania gets out of control, they step back—so that's what they did when sentiment turned extremely bullish. But over the past few months, that speculative sentiment has been crushed—which aligns with RSI readings (detailed in the technical section below).
Now, these guys are under-positioned. Everyone and their mom is buying semiconductor stocks. Remember all those photos in January of people queuing outside gold shops? As Citrini says—"When people worry about the future, they buy gold. When they worry about the present, they sell gold." People sold gold because of the war—they were worried about the present. Now, I don't know if people are worried about the future, but they certainly aren't worried about the present! The queues outside gold shops in my country are gone.
Now, gold sentiment has cooled. Today, few people care—again, everyone is buying semiconductor stocks and momentum plays. I think this is a great mix—asymmetry, timing, plus people aren't positioned yet. This is the kind of fat trade I love. Today, few people care.
On the macro front—theoretically, higher real rates and a stronger dollar should make gold fall. I'm no macro expert, but the logic is: higher real rates → gold pays no interest → investors prefer bonds; simultaneously, a stronger dollar → gold becomes more expensive for buyers in other currencies.
Despite this, gold hasn't broken below $4000. I've traded gold myself, going long multiple times—all unsuccessful. It did churn around in the $4000 price range—initially bearish. But over time, that price range became support—clearly, this was accumulation.
Seasonally: Early August is when the summer doldrums end and seasonal strength returns—hence the current breakout.
Finally, thanks to Macro Tourist: Gold's 1-year 25-delta call option skew is at its lowest level since pre-pandemic—no one is paying for right-tail risk.
Technical Arguments
Gold has triggered numerous technical signals:
In the bull market of the past few years, the 50-day moving average has been a key level that gold often stayed above. It would always test that level and then resume the uptrend.
January 26th—sharp pullback from $5500 to $4400; gold bounced off the 50-day MA. Bull market resumed. Iran war began—closed below the 50-day MA. It remained below since, with the 50-day MA acting as resistance.
Now, the price has reclaimed that line (blue line).
Furthermore, a simple downtrend line (black line in the chart) has been broken.
You might think technical analysis is male astrology. But PTJ said: "One sure rule is to get out of anything that breaks below the 200-day moving average." Guess what gold just did?
That's right, it has reclaimed the 200-day EMA. One last point is the RSI. I find RSI on higher timeframes like weekly, monthly, etc., to be strong signals. Gold's weekly RSI was near oversold for several weeks. Every time it touched that zone, it seemed to kick off a new uptrend.
Now, the price has rallied. The structure is very clean. It has broken through pretty much all the EMAs. Short-term EMAs are also crossing, which is a bullish indicator. EMA 10 crossing above EMA 21.
A note of caution. Gold triggered a sell signal on my (20/3) Bollinger Bands (20-day EMA, 3 standard deviations). This signal is almost always a sell. So, I expect a short-term pullback. I will aggressively build a position on that pullback. As I've said, gold can be traded with size because intraday volatility isn't huge (not like stocks moving 10% in a day).
The range between $4341 and $4191 (daily EMA 50) could be a good area to set limit buy orders.
The invalidation level for the whole trade is around $4170. A close below that would essentially be the top of the range. A close below means it's back to range-bound.
