Gold’s historic rally has pushed the precious metal into its most extreme overbought technical condition in over forty years, flashing a major sell-off warning.
Specifically, on the monthly chart, gold’s Relative Strength Index (RSI) has surged to 90, marking the most overbought reading since 1980.
Historically, elevated RSI levels have signaled exhaustion in bullish momentum, often preceding corrections or prolonged periods of consolidation.
Notably, the last time gold reached this threshold was during the 1980 blow-off top, when prices soared to record highs before plunging in the years that followed.
Currently trading near $3,900, gold has climbed 48% in 2025, driven by geopolitical uncertainty, central bank buying, and investor demand as a hedge against inflation and currency risk.
However, the extreme RSI indicates overheating in gold and increases the risk of a sharp pullback, similar to the post-1980 correction, when speculation led to steep losses.
Gold targeting $4,000
Currently, gold is edging toward $4,000, now supported by the U.S. government shutdown that has driven safe-haven demand.
With Washington gridlock deepening and expectations rising for a Federal Reserve rate cut, investors are pouring capital into gold as stocks face renewed pressure.
Meanwhile, the weakening U.S. dollar is adding further support. In this case, a softer greenback, tied to prospects of looser monetary policy and falling bond yields, makes gold increasingly attractive.
To this end, as of press time, the U.S. Dollar Index (DXY) was on track for its fourth straight day of losses, its longest losing streak since July. The index fell to 97.64 on Wednesday, extending its slide after peaking near 99 earlier in September.
On the daily chart, the move mirrors July’s pattern, when the dollar endured a four-day decline before briefly rebounding.
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