Rhona O'Connell argues gold’s drop below $4,000 was mostly a correction from an overextended, crowded run-up, amplified by equity-market stress and later by higher-rate expectations. She says gold is still primarily a portfolio-risk hedge rather than a simple inflation hedge, and she sees silver as structurally supported over time, though it behaves more like copper in recessions.
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Rhona O'Connell says the move in gold below $4,000 should be understood as the unwind of a very crowded, very extended rally rather than as a change in gold’s long-term role. She traces the rise back to late 2024 and early 2025, when geopolitical worry, institutional “capitulation,” and then algorithmic/CTA buying pushed gold “parabolic” and eventually too far. In her view, once the market became overowned and vulnerable to stop-loss selling, the first big drawdown was inevitable. She adds that the selloff was not caused only by gold-specific factors. A second driver was weakness in equities, which she says can force investors to sell gold to raise cash and meet margin calls. …
Near term, gold looks tactically fragile: it has already slipped under $4,000, is close to a bearish moving-average setup, and could see another flush if specs de-risk or rates turn more hawkish.
Over the next several weeks or months, the base case is a choppy consolidation where gold follows rate expectations and risk sentiment more than geopolitics. A cleaner recovery would need the technical damage to stop, inflation/rates to soften, and physical demand to reappear more forcefully.
Longer term, gold still fits as a non-liability portfolio insurance asset, so the strategic thesis remains intact even after sharp corrections. Silver’s structural outlook may actually be tighter than gold’s because supply is less price-responsive and industrial demand themes remain intact.
Gold's sharp fall was partly due to weak-handed holders and speculators with stop-loss orders being triggered as the market corrected from being overdone.
The speaker argues that gold had gone parabolic, became overcrowded, and the correction was inevitable because weak-handed speculators exited.
There will be a substantial shortage of silver because only 21% of supply is price elastic and base metals mining is not expanding quickly enough to boost byproduct silver output.
The speaker argues most silver is a byproduct of base/gold mining which isn't expanding, so structural deficit will force prices higher.
StoneX's chief strategist expects one 25-basis-point rate hike in Q4, which is roughly consensus, though some analysts now expect two hikes.
The speaker states the house view from StoneX's US-based chief strategist on the Fed's next move.
What factors are behind the recent downward move in the gold price, given it fell below $4,000 this week?
Gold was heavily overbought after going parabolic from late November/early December, driven by algorithmic trading and stop-loss momentum, topping near $5,500 on Jan 29. The subsequent drop had two causes: the move was overdone and weak-handed speculators triggered stop-losses as it fell, and the simultaneous equity market meltdown caused portfolio holders to sell gold as a liquid asset to meet margin calls — gold behaves as an insurance policy, not a crash-proof safe haven. Rona shows a chart showing four similar occasions since 2023 where gold fell alongside equities during stress.
What can you pull out from Kevin Worsh's first Fed meeting comments that helps understand the rate path forward?
Rona notes she was at a Pantheon Macro conference where the US analyst said Kevin Worsh 'did a very good job of saying nothing for an hour' — he's only been in post 3-4 weeks, needs to gauge the FOMC committee, and faces geopolitical uncertainty. StoneX's chief strategist is looking for one 25bp hike in Q4, while Pantheon's analyst sees a possible Q4 hike followed by easing in 2027. The labor market is okay; inflation is the main concern. Worsh is doing proper due diligence rather than rushing.
What can you say about inflation moving forward, especially after the PCE price index data?
Rona has been surprised the Fed maintains the 2% target for the last 12 months — many think 2% is no longer feasible given US economic resilience. Income tax credits that boosted spending will fade, potentially easing that inflation component. Oil prices are an unknown variable depending on Middle East developments. She notes professional investors shouldn't use gold as a primary inflation hedge (TIPS are better) — gold's role is as a risk mitigator and efficient frontier optimizer.
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