The pullback that fooled everyone

Gold finished September down close to six percent, its third monthly fall of five percent or more this year. Monday's close of $4,115 was the lowest in seven weeks, and the 30-year Treasury yield touched 5.62 percent, a level last seen in 2002. If you're wondering whether the bull market that began with the 2024 breakout has run its course, you won't be alone.

So rather than argue about what’s ahead in October, let me show you the biggest pullback a gold bull market has ever produced, and what the data says about months like the one we've just had.

Gold closed 1974 at $193 an ounce, more than five times where it had started the decade. On the final day of that year, Americans regained the legal right to own gold bullion for the first time since 1933. Instead of the expected rush of new buyers, selling arrived. The US Treasury auctioned gold from its reserves within a week, the IMF later began auctions of its own, and inflation started to ease.

By the end of August 1976, gold was at $104. That's a fall of 46 percent over 20 months, in the middle of the greatest bull market gold has ever had. The metal didn't get back to its 1974 high until July 1978. Then it went to $835 by January 1980, eight times the 1976 low.

In researching this article, I went back through every month since 1970 in which gold fell five percent or more during one of its three bull markets: 1971 to 1980, 2001 to 2011, and the current bull since the 2024 breakout. There are 26 of them, including March, June and now September of this year.

For the 23 with a full year of history behind them, gold was higher 12 months later 83 percent of the time, with a median gain of 26 percent. Every month inside those bull markets, good or bad, scored 91 percent and 25 percent. A bad month took a little off the odds and nothing off the size of the gain.

I think the exceptions are the useful part. Four of the 26 came in 1975, and gold was lower a year after every one of them, on its way to the 1976 low. Three more came in 1976 itself, and gold was higher a year after each. The monthly number couldn't tell you which was which.

What came before did. By January 1980 gold had more than tripled in 12 months and doubled in the final two, capping a nine-year run that had multiplied it 24 times over. Paul Volcker's Fed was on its way to a 20 percent interest rate. The 1976 low, by contrast, came after two years of grinding lower.

As for 2026, gold's closing high on January 28 was $5,420, two and a half times its March 2024 breakout level. The fall from there to July's low was 27 percent. I can't tell you definitively July's low will hold, and nobody can. What I can say is that the run into January was only two years old, not nine, and that the 1974-76 correction was nearly twice as deep as this one.

Across the three bull markets since 1970 there have been eight pullbacks of 15 percent or more, and every one of the seven that's complete went on to a new high.

One more difference cuts in gold's favor. The 1976 low arrived with a backdrop where the economy was getting better. Inflation was easing, the Fed had cut its main rate from above 12 percent to around five, and the US Treasury and the IMF were selling gold into the market.

This year's pullback has arrived with a backdrop moving the other way. US federal debt passed $40 trillion in August, and the annual interest bill on it now exceeds the entire defense budget. The war with Iran, which began at the end of February, has left the Strait of Hormuz largely closed for seven months, a waterway that carried a fifth of the world's seaborne oil and gas before the fighting started. Brent crude sits around $100 a barrel despite the largest coordinated release of emergency oil reserves in history, and the Fed is raising rates into all of it.

It's hard to design a backdrop more favorable to gold, and the price still fell six percent in September. In 1976 it fell with the wind at its back, whereas this year it's falling with the wind in its face.

When Theseus flagged the March 2024 breakout from a base stretching back to 2013, the research said breakouts from bases that long start multi-year bull markets, with significant corrections along the way. Last year in The Gold Awakening I wrote that I expected gold to exceed $10,000 by the early 2030s, with silver somewhere in the $100 to $150 range. We saw unprecedented gains in precious metals after I wrote that and nine months of 2026, and a war included, haven't changed that view.

If September’s price action rattled you, take another look at the left-hand side of the pullback chart at the top of this article. That's what a real shakeout looks like, and it's the one nobody remembers.