The Scotiabank Global Equity Research team dropped a meaty note this morning breaking down six major gold bull cycles over the past 50 years, and the conclusion is pretty straightforward: this one isn’t over.
Gold is sitting around $5,025/oz right now, up 209% from the October 2022 low of $1,628. That’s a heck of a move, and naturally the number one question is whether it’s time to take profits. Scotia’s answer? Not yet.
The playbook keeps repeating
The team — led by Tanya Jakusconek and Hugo Ste-Marie — mapped out every major gold cycle going back to 1970 and found a consistent pattern. Each one was triggered by some combination of an economic/financial shock, elevated geopolitical tension, and a sustained USD downtrend. And each one ended the same way: the economy healed, real rates moved higher, and the dollar caught a bid.
Here’s how the current cycle stacks up against history:
- 1970-1974: +422% over 52 months (oil embargo, end of Bretton Woods, inflation shock)
- 1976-1980: +721% over 40 months (Iran revolution, Volcker hadn’t tightened yet)
- 1985-1987: +76% over 33 months (Plaza Accord dollar devaluation, ’87 crash)
- 2001-2008: +292% over 83 months (dot-com bust, 9/11, housing bubble)
- 2008-2011: +167% over 33 months (GFC aftermath, QE, European crisis)
- 2022-present: +209% over 39 months (pandemic stimulus hangover, tariffs, geopolitical chaos)
The average cycle ran 48 months with a 336% gain. At 39 months and 209%, the current cycle has room on both duration and magnitude if history is any guide.
What’s different this time (in a good way for bulls)
Scotia highlights three structural differences that could extend this cycle beyond what we’ve seen before:
1. Central banks are buying, not selling. Emerging market central banks have been aggressively adding gold to diversify away from the dollar. This is a secular shift, not a cyclical one. Gold is under 30% of foreign reserves globally — it was over 50% in the late 1970s.
2. New demand channels. Gold ETFs like GLD were game-changers in the mid-2000s. Now we’re seeing the tokenization of gold and stablecoin issuers like Tether entering the physical market in 2025, creating entirely new non-traditional buying pressure.
3. Investors are still underweight. In the 2000s cycles, generalists moved to market weight in gold. Today, despite the TSX Gold Index sitting at ~15% of the TSX, institutional positioning remains below average. A separate survey from BofA recently showed clients allocating just 0.8% to gold. That’s dry powder.
What could go wrong
Scotia’s regression model puts gold’s “fair value” at roughly $3,400/oz. The current spot of ~$5,000/oz implies a risk premium of about $1,600/oz — far above the historical average of ~10% over fair value.
Scotia lays out four risks to watch:
- Dollar reversal. Every gold cycle ended with a stronger dollar. If something triggers sustained USD strength, this is over.
- US midterm elections. A Democratic sweep in November 2026 could be read as a return to institutional normalcy, eroding the risk premium. They note the Kevin Warsh Fed Chair nomination had a similar effect — just signaling Fed independence was enough to knock gold’s safe-haven bid.
- Supply shock. If central banks slow purchases, ETF holders liquidate, or producers start hedging again in size, that’s a lot of supply hitting the market.
- Geopolitical détente. If tensions actually cool, that $1,600/oz risk premium starts shrinking in a hurry.
Gold equities: the leverage play
Gold equities have historically moved 1-2 months ahead of bullion on the way up and offer average leverage of about 1.5x to the gold price. The current cycle is tracking that pattern, with TSX Gold index up 346% versus gold’s 209%.
Scotia’s top picks: AEM, AGI, AU, B, DPM, EDV, KGC, NEM, OGC, PAAS.
The bottom line
The macro setup that’s been driving gold higher — fiscal excess, geopolitical uncertainty, dollar weakness, negative real rates — isn’t going away anytime soon. Scotia sticks with their overweight recommendation and says if you have no or low gold exposure, buy the dips.
