We're In a Very Scary Area For Gold: Mike McGlone

Gold retreated after topping $3,500 an ounce for the first time as traders booked profit following a nearly 10% rally this month.

Bullion fell by as much as 1.5% during US hours after earlier surging to a fresh record as risk appetite improved with equities bouncing back, bonds and the dollar stabilizing. The precious metal is also in the overbought territory, signaling the recent price ascent may be overdone. Its 14-day relative-strength index — a gauge of the pace and intensity of moves — topped 78, above the level of 70 that can point to an asset being overbought.

“Gold’s tactically very overbought and extended - it’s risen $500 plus in 8 trading days, so naturally there’s likely a mix of a buyers pause and some risk reduction,” said Nicky Shiels, head of research and metals strategy at MKS Pamp SA.

Earlier, gold gained as much as 2.2% on Tuesday to briefly top $3,500, as concern that President Donald Trump could fire Federal Reserve Chair Jerome Powell triggered a flight from US stocks, bonds and the dollar.

Safe havens such as the yen, the Swiss franc, and gold have rallied in recent sessions following Trump’s repeated calls on the Fed to cut interest rates immediately, a move seen as a threat to the central bank’s independence that drove the dollar to the lowest since 2023.

“But there can be a SLOWING of the economy unless Mr. Too Late, a major lo

ser, lowers interest rates, NOW,” Trump said on social media on Monday, referring to Powell.

Bullion has surged about 29% this year, outperforming nearly every other major asset class, as investors flee equities exposed to an expanding trade war. Typically in risk-off moments, traders turn to US government debt. But given a recent selloff in Treasuries and the US fiscal position generally, gold is now “the only true safe haven left,” according to analysts at Jefferies Financial Group Inc.

The precious metal’s ferocious run began in early 2024, as central banks, seeking to diversify their foreign exchange holdings beyond the US dollar and insulate themselves from the threat of sanctions, became big buyers. More recently, flows into bullion-backed exchange-traded funds have picked up.

Banks have also become progressively more positive about gold as this year’s rally has gone from strength to strength. Among them, Goldman Sachs Group Inc forecast the metal could hit $4,000 an ounce midway through next year.

The precious metal’s rally shows “that there is a desire to diversify out of dollar assets into a broader range of safe havens,” Kamakshya Trivedi, head of global FX, rates and emerging-market strategy at Goldman Sachs, told Bloomberg TV.

Gold for immediate delivery traded 1.5% lower at $3,373.19 an ounce at 12:41 p.m. in New York, easing back from its fresh all-time high. The Bloomberg Dollar Index was up 0.2%. Silver and palladium rose, while platinum slipped.

Bloomberg's Mike McGlone reports.

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