Gold: The risk of a major pullback after the surge is looming.

Gold's technical indicators are flashing extreme overbought signals, with its monthly RSI at a 55-year high. Analysts draw a historical parallel to the 1979-1980 period, marked by the U.S.-Iran hostage crisis, stagflation, and Reagan's election.

The current U.S.-Iran tensions could push gold prices even higher in the short term.
However, a swift resolution to the conflict could trigger a significant price pullback, similar to the multi-year decline gold experienced after its 1980 peak.
While short-term short selling is not advised due to ongoing geopolitical and U.S. fiscal uncertainty, the article strongly cautions against chasing the current rally.
Investors are advised to monitor U.S.-Iran developments closely and maintain high sensitivity to potential sudden shifts.

Author: TVBee

Be aware of the risk of a pullback in gold prices!

Technical analysis indicates that gold is overbought.

While it's true that technical analysis can be ineffective for assets like gold.

However, the monthly RSI is 95.6, the weekly RSI is 82.8, and the daily RSI is 88.5, all indicating overbought conditions. The overbought level on the monthly chart is probably the highest in 55 years.

History is strikingly similar

First, comparing history using logarithmic coordinates, the present situation is somewhat similar to that before Reagan took office in 1979.

Second, the US economy was experiencing stagflation at the time, but now the CPI is relatively high.

Third, it was during the Iranian hostage crisis (after the Islamic Revolution, the pro-American prince Pahlavi was overthrown and went into exile, and Iranian students stormed the US embassy, taking diplomats hostage and demanding that the US hand over Pahlavi).

Iran is currently experiencing internal turmoil, and the United States is exerting military pressure on Iran, with the possibility of military action not ruled out.

Fourth, even many of Trump's actions, including the MAGA slogan, bear some resemblance to Reagan's when he took office in 1980.

In conclusion

By comparing technical factors and historical events, it is possible that gold will continue to rise as the US-Iran conflict escalates.

However, most of Trump's actions this year have been swift and decisive, raising concerns about a potential reversal in the US-Iran situation (such as Iran suddenly surrendering). After the conflict subsides, be wary of a potential pullback in gold prices.

From January to September 1980, gold prices declined before rebounding. Then, from September 1980 to June 1982, they fell continuously for nearly two years, finally returning to their previous highs in 2007-2008.

Short selling is not recommended in the short term, as the US government may enter a short-term shutdown on January 31, and the US-Iran situation has not yet calmed down.

However, caution is advised when chasing rallies! It's not that you can't buy, but it's recommended to be highly sensitive and closely monitor US-Iran events.

(Note that Figure 1 is on logarithmic scales, while Figure 2 is on linear scales. The monthly upward trend of gold and the peak of Bitcoin's bull market are somewhat similar.)