The AI Trade Has Rotated. Has Gold Bottomed?

This week’s update at a glance

• Semiconductor money flows have changed. The long-term AI case remains compelling, but wider swings, gaps and heavier downside volume have reduced the shorter-term probabilities.
• The market is rotating, not being deserted. Industrials, financials and healthcare have been outperforming technology, while volatility remains inconsistent with broad institutional panic.
• Gold may be forming a bottom. Downward momentum is slowing and sellers are losing conviction, but there is still no confirmed upward trend.
• The response is portfolio positioning. Rather than making dramatic all-in or all-out decisions, investors can progressively rebalance, retain some cash and demand deeper entries where risk has increased.

What you’ll learn

• Why strong semiconductor fundamentals do not automatically make every dip a good short-term entry.
• How to separate a compelling two-year investment thesis from a trade that currently lacks confirmation.
• Why recent market action points to sector rotation rather than widespread capital leaving equities.
• The price and relative-strength signals that could confirm a sustainable recovery in gold and gold stocks.

The thinking shift

You do not need certainty about what happens next. You need a portfolio positioned according to the evidence currently available.

The fundamentals of semiconductors remain extremely attractive over the longer term. However, fundamentals are not a reliable timing tool over the next few weeks or months. Markets price forward expectations, positioning and changing money flows rather than simply rewarding what appears logically compelling today.

When the character of a trend changes, the appropriate response is to reassess probabilities, portfolio weightings and entry requirements. It does not automatically mean abandoning the theme.

What history shows

Crowded trades can correct even when the long-term fundamental case remains intact. Once a large proportion of investors already owns the trade, fewer buyers remain to sustain the same rate of advance and the market becomes more vulnerable to changes in interest-rate expectations, positioning or sentiment.

Precious metals have a different challenge. Following a period of excess, gold and gold stocks often shake out impatient investors for longer than expected. The current decline has produced an increasingly attractive reward-for-risk equation, but a compelling valuation or economic argument does not prove that the timing is right.

The next sustained advance is more likely to be confirmed by improving money flows, stronger gold-stock performance and gold beginning to outperform the S&P 500.

Where I’m focused now

• Semiconductors: Retaining longer-term exposure while requiring deeper dips or clearer confirmation before increasing short-term positions.
• Portfolio rotation: Assessing opportunities in industrials, financials and healthcare rather than concentrating excessively in crowded technology trades.
• Gold and silver: Watching for evidence that basing patterns are complete and buyers have regained control.
• Risk management: Rebalancing progressively, maintaining some cash and ensuring each position suits its intended purpose and timeframe.

Important information

_{Any advice in this video is general advice only. Neither your personal objectives, financial situation or needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice. Garry Davis (AR No:317590) is an authorised representative of Primary Securities Ltd (AFSL No. 224107).}

_{Note to traders* The publishers of this article/information/promotion wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own enquiries as to the validity of any information in this article/information/promotion...}

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