The debasement trade, economic uncertainty, and geopolitical headwinds are some of the arguments for what has enhanced the appeal of gold in 2025, but whatever you want to attribute it to, one thing is certain: gold is having its best run in decades.
“The rising price of gold is a direct response to the dual risks of inflation and currency devaluation in the United States and other major economies. Ever since the Great Recession, gold has been an outstanding performer because of the enormous debts incurred by governments around the world,” Daniel Altman, economist and Founder of High Yield Economics, wrote on Tuesday.
The precious metal surged to another all-time high on Tuesday, topping $4,000 an ounce for the first time ever. And while top commentators like Ken Griffin see the rally as a sign of a more concerning trend in markets, the positive momentum doesn’t appear to be waning—for now.
Bank of America recently examined gold’s colossal rally, laying out the possible risks that a correction could be looming.
Signs that the rally is fading
The first factor is its extended price run.
BofA analyst Paul Ciana noted that gold prices have been rising steadily for seven consecutive weeks, a phenomenon that has occurred 18 times since 1970. However, they see this as a potential problem, as during past rallies that went on for that long faded in the weeks after, with gold eking out more gains in the following five weeks just 28% of the time.
“Since the 1970s, many big round number areas have served as support and/or resistance levels for the gold trend at hand,” Ciana stated. “Since the start of 2024, gold prices have approximately doubled from +/- $2,000 to +/- $4,000.”
Related stories
Business Insider tells the innovative stories you want to know
Business Insider tells the innovative stories you want to know
Second, Ciana said that gold prices may be approaching the peak of the latest rally, as the $4,000 per ounce price is 20% above the 200-day simple moving average.
During previous price rallies, gold typically reached its peak when it started trading 25% above the SMA. They said this suggests that the market may be approaching this cycle’s tipping point, after which its course is likely to reverse.
He added that while the bank sees two possible scenarios where gold prices keep rising, both suggest that a material correction is likely looming.
Finally, the 14-month RSI (Relative Strength Index), which measures short-term momentum, implies that gold is highly overbought, a thesis that Adam Turnquist, Chief Technical Strategist for LPL Financial, echoed amid the latest jump to all-time highs.
“We recommend adding exposure on weakness given the degree of overbought conditions. Silver could also be another option in the space as it continues to gain relative strength over gold,” Turnquist said.
Ciana said that in times when gold’s RSI approached 80, it was nearing a peak with a correction soon to follow.
When RSI passes 70, it typically means that an asset is overbought. This data implies that gold prices have been overbought for over the last month.
