The price of gold has officially entered uncharted territory. Surging past $4,000 an ounce for the first time ever, the precious metal is enjoying its strongest rally in decades, fueled by inflationary pressures, fears of currency debasement, and mounting geopolitical uncertainty. No matter how analysts choose to frame the rally whether as a hedge against macroeconomic volatility or a consequence of investors fleeing traditional currencies the undeniable fact remains: gold is having a historic moment.
Economist Daniel Altman of High Yield Economics pointed to deep structural concerns behind the rush into gold. “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,” he wrote on Tuesday. “Ever since the Great Recession, gold has been an outstanding performer because of the enormous debts incurred by governments around the world.”
While optimism around gold's trajectory continues, not everyone is convinced the rally has staying power. Analysts at Bank of America have recently published a note assessing the ongoing surge in gold prices, flagging multiple technical indicators that suggest a correction may be just around the corner. Chief among those concerns is the sheer duration of the current rally. BofA analyst Paul Ciana observed that gold has posted gains for seven straight weeks a pattern that has occurred only 18 times since 1970. Historical data shows that in such cases, the metal has managed to eke out additional gains over the following five weeks only 28% of the time.
Another red flag, according to Ciana, is the $4,000 milestone itself. Since the 1970s, large round number price levels have often served as psychological barriers either as support during downturns or as resistance during rallies. Gold has approximately doubled in price since the beginning of 2024, rising from around $2,000 to its current level. That doubling in such a short timeframe has raised concerns that the rally may be overextended.
Ciana also noted that gold is currently trading 20% above its 200-day simple moving average (SMA). Historically, the commodity tends to peak when it reaches a level approximately 25% above its SMA. That puts the current price action dangerously close to what BofA considers a tipping point a place where rallies have historically reversed course.
Further compounding the risk is the Relative Strength Index (RSI), a widely used momentum indicator. Gold’s 14-month RSI is now approaching 80, a level that typically signals extreme overbought conditions. LPL Financial’s Chief Technical Strategist, Adam Turnquist, echoed that concern, stating that the technical setup implies a heightened risk of a pullback. “We recommend adding exposure on weakness given the degree of overbought conditions,” Turnquist said. “Silver could also be another option in the space as it continues to gain relative strength over gold.”
Ciana emphasized that while Bank of America does envision two scenarios where the gold rally continues, both also point to a high likelihood of a material correction in the near term. When an asset’s RSI crosses above 70, it usually indicates overbought territory. Gold has been trading above that threshold for over a month now, suggesting prolonged market exuberance that may not be sustainable.
Despite these warnings, investor interest remains strong, buoyed by a combination of macroeconomic headwinds and the search for perceived safe havens. In particular, ongoing concerns about currency devaluation and central bank policy missteps have led many investors to favor physical assets like gold and silver over fiat-based financial instruments. But with prices already at record highs and technical signals flashing red, analysts caution that the current phase of the rally could be entering a critical juncture.
