Gold is approaching a technical bear market, down nearly 20% from its all-time high in January. Traditionally seen as a store of value and a hedge against geopolitical uncertainty, gold’s recent performance challenges this narrative. Despite escalating tensions in the Middle East, prices have fallen about 10% since the war began in late February.
Markets have also reassessed their interest rate outlook, with cuts now largely postponed and policy expected to remain restrictive until December 2026. At the same time, rising oil prices, driven by geopolitical risk, are adding upward pressure on inflation, reinforcing the longer-term higher rate environment, a major headwind for gold.
Taking into account the M2 money supply, which includes cash, deposits and other liquid forms of money, gold is trading near the levels seen during the major all-time highs in 1974 and 2011, when it was $200 and $1,800 per ounce, respectively. On this basis, gold appears to be consolidating at high levels, potentially forming a cyclical floor to global liquidity.
In contrast, bitcoin relative to M2 remains in a consolidation phase similar to 2024, while retesting its 2021 highs on a liquidity-adjusted basis. Historically, each cycle has seen bitcoin surpass previous highs when adjusted for money supply. With bitcoin still around 40% below its October high, this may represent a typical consolidation range before further upside.
Gold has traded alongside Bitcoin, tick after tick since it fell from $5,000 on Wednesday, showing evidence of positive correlation after straying from crypto markets previously.
