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SPOT GOLD'S HEART IS FAR FROM COLD

Gold prices are jumping more than 1% on Monday to hit a record high, as safe-haven demand is surging on fears of a global trade war after U.S. President Donald Trump announced new tariff plans.

Gold's trend is clearly up, and with this, its Relative Strength Index $(RSI)$, a momentum oscillator, has been especially hot. This indicator, on a monthly basis, is on its longest run of overbought readings in more than 50 years:

In January, gold's 9-month RSI ended above the 70.00 overbought threshold for an 11th-straight month. Using LSEG data going back to early 1968, this marked the longest such streak since a 21-month record run that ended in July 1973. (Since 1973, there had been four 10-month streaks where this RSI ended above 70.00).

Now with February gains so far, the RSI is attempting to score its 12th month in a row in overbought territory.

Of note, last October, the RSI ended the month at 89.4, or its hottest reading since 89.41 in February 1980.

After weakening to 74.1 in December, the RSI has turned up again, and it's now at about 83. Therefore, in the event gold were to stumble this month, and end February below January's $2,801 close, a bearish momentum divergence can develop, which may heighten concerns for a deeper setback.

Conversely, a continued gold rally can push the RSI to even more extreme levels.

Gold, itself, at around $2,900, is attempting to rise for a seventh-straight week. It last rose more than six weeks in a row with a nine-week winning streak that ended in August 2020.

Thus, the current setups can suggest chasing gold's gains at this time may be a risky proposition.

The upper monthly Bollinger Band, which is now at about $2,960, is resistance ahead of the $3,000 area.

The broken resistance line from the 1980 high is now support around $2,740. The November 2024 trough was at $2,536.

Meanwhile gold stocks .HUI have strongly outperformed so far this year. The HUI is up about 19% YTD vs a 2.5% rise for the S&P 500 index .SPX.

That said, the disconnect between gold stocks and gold has been glaring. The HUI is still down almost 50% from its 2011 record intraday high.

(Terence Gabriel)

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FOR MONDAY'S EARLIER LIVE MARKETS POSTS:

ASSESSING THE MARKET IMPACT OF A POSSIBLE UKRAINE CEASEFIRE - CLICK HERE

BANKS: NEXT STOP - SEPTEMBER 2008 HIGHS - CLICK HERE

TRUMP CHINA PLANS A POSITIVE FOR EUROPE DISCOUNT RETAILERS - CLICK HERE

EUROPE IN THE GREEN, BP TOP GAINER - CLICK HERE

EUROPE BEFORE THE BELL: SHRUGGING OFF TARIFF TALK - CLICK HERE

ALL TARIFFS, ALL THE TIME - CLICK HERE

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)