Why Now’s Not the Time to Chase Gold

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By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

Gold is up more than tech stocks in this bull market
But gold’s Seasonality is turning bearish
Buy small caps now to play lower interest rates
How Jason Bodner’s system knows the market is still “risk-on”
Watch these top-rated stocks to play the trend

The mainstream press has a severe case of tunnel vision…

In the Age of AI, you can’t blame reporters for focusing so much of their attention on the tech stocks’ rally.

But that masks an even bigger winner this year… gold.

The chart below of gold versus the tech-dominated Nasdaq 100 tells the story…

The blue line is the SPDR Gold Shares ETF (GLD), and the green line is the Invesco QQQ Trust (QQQ). That ETF tracks the 100 biggest non-financial companies on the Nasdaq stock exchange – including mega-cap tech stocks like Microsoft (MSFT), Amazon.com ( AMZN), Tesla (TSLA), Alphabet (GOOGL), Meta Platforms (META), and Nvidia (NVDA).

As you can see, QQQ has climbed 13.5% in 2025. But gold is up 36% – nearly 3x that return:

You can come up with countless stories about why this is happening. Maybe investors are worried about inflation making a comeback. Maybe they’re worried about a recession on the horizon.

And you might be right. Investors have traditionally turned to gold as an inflation hedge and a defensive asset when times are tough.

But here at TradeSmith, we don’t trade stories. We trade cold-hard data.

And what the data says for sure right now is that there’s momentum behind the gold trade.

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That’s what our TradeSmith Health indicator is showing…

It tracks the technical strength of stocks based on their unique volatility footprint.

The more volatile a stock is, the higher its Volatility Quotient (VQ). This tells us how far a stock or fund can fall from a recent high before it falls into our Red Zone and triggers a “sell” signal. When a stock’s in the Green Zone, it’s trading well above that level and indicates a “buy” signal.

Here’s the Health reading for the stocks in the VanEck Gold Miners ETF (GDX):

Of the 69 holdings in the popular gold mining stock ETF, all but one is in the Green Zone. Bellevue Gold (BGL.AX) has been stuck in the Red Zone for a year.

Plus, 61.4% of the stocks in GDX carry a Strong Bullish rating. This rating factors in the current trend, momentum, the Business Quality Score (BQS), and other TradeSmith indicators.

Another 36.8% carry a Bullish rating – with just one stock holding a Bearish rating.

Even more impressive, 77.6% of the stocks in GDX are trending up.

In short, nearly the entire gold mining sector is rallying together.

Now, let’s look at how our system rates the tech-heavy QQQ.

Only 70.3% of QQQ stocks are in the Green Zone. And barely 50% of these tech stocks hold a Strong Bullish rating:

Compare that to nearly 100% of GDX stocks in the Green Zone plus 61.4% Strong Bullish ratings. The tech sector just isn’t as healthy as the gold mining sector right now.

And just 42.6% of the stocks in QQQ are in an uptrend… versus the more than 77% of gold mining stocks that are trending higher right now.

But keep an eye on the bearish seasonality window coming up for gold…

As longtime readers will know, we also like to look at historical patterns in stocks to find their best (and worst) times of year.

Every day, our system runs 50,000 tests to analyze every stock in the major indexes and zero in on the ones with the strongest seasonality trends.

These are periods of time when stocks tend to rise and fall, year in year out.

And as you’ll see, there’s a strongly bearish seasonality window coming up that traditionally lasts through September.

See that white area between the two blue vertical lines? That’s now through Sept. 30. During that time, gold has trended lower in 11 of the past 15 years… with an average loss of 2%:

Going by this metric, you’re better off waiting until the end of the month to buy gold.

Instead, small-cap stocks should be top of mind right now…

As the Fed begins to cut rates, that will give a much-needed boost to small-cap stocks – anything with a market cap between $250 million and $2 billion.

Small-cap borrowing costs are tied more closely to bank loans, which follow the Fed’s short-term rate, than they are to Treasury yields, which guide corporate bond rates.

So a rate cut from the Fed will drive down their borrowing costs and improve their margins.

And that’s not the only reason to be bullish on small caps right now. Big money is also flowing into the sector.

That’s according to Jason Bodner’s Big Money Index (BMI)…

Before joining TradeSmith, Jason executed multimillion-dollar trades for deep-pocketed investors at financial services firm Cantor Fitzgerald.

And after he quit Wall Street, he developed the Big Money Index to spot when big money is flowing in and out of individual stocks and sectors.

The higher the reading, the more that Big Money is piling in. If it reaches 80%, the market is getting overheated. That’s a signal to steer clear. If it falls below 25% Big Money buys, it’s getting oversold. That’s a signal that it’s time to buy.

And right now, Jason sees a lot of Big Money buying in small-cap stocks. Here’s Jason…

Since Aug. 1 – the start of the worst two months for stocks – 87.5% of Big Money buys have been small- and mid-caps valued under $50 billion. Inflow signals in these stocks have outnumbered sell signals by more than two to one. And keep in mind, these signals are unusual activity, not garden-variety buying and selling.

That’s great for us here in Quantum Edge Pro because we focus on smaller stocks with bigger potential. It’s also good for the stock market overall.

When Wall Street is loading up on smaller stocks, it means they’re in “risk-on” mode.

So it’s worth taking a look at Jason’s Quantum Edge Top 10. It covers the 10 stocks with highest Quantum Edge scores – from small caps to large caps.

Here’s the list as of Sept. 9:

Regular readers might recognize Sportsradar Group (SRAD), which Jason highlighted last Thursday as a great play for the 2025 NFL season in the U.S.

Other new entrants to the list include video game publisher Electronic Arts (EA), social media platform Pinterest (PINS), and ride-sharing company Lyft (LYFT). I haven’t seen any of these names on the list in all my years watching it, so I wanted to call them out.

Just as important are the stocks that show up a lot on the top 10 such as ETF sponsor WisdomTree (WT) and social tech giant META.

Those are great ways to play stock market strength right now.

And the Quantum Score is an endless trove of great ideas just like these.

The best way to put it is that the Quantum Score finds great stocks in great businesses. There are plenty of great businesses with stocks that don’t go up. The Quantum Score cuts all those out and finds only the stocks worth owning.

The secret behind finding great stocks vs. great businesses, as Jason discovered in his time as a Wall Street dealmaker, is money flows.

Once he learned to spot the telltale signs of large-scale money flows in a stock… and then paired that with the fastest-growing companies in the market… he developed a score that has consistently pointed to market-beating opportunities.

Following this system from 1990 through today would’ve seen you beat the S&P 500 by 5 to 1. That’s how powerful it is.

For complete details on how his Quantum Edge system finds breakouts before the stock goes through the roof, watch this briefing from TradeSmith CEO Keith Kaplan.

Keith not only takes you through how to “follow the money” to great growth stocks… he gives you a specific ticker to get you started.

Why Now’s Not the Time to Chase Gold