<p>The short answer is… when the market—or you—have been gripped by a delusion; that is to say, when you have chosen to ignore caution and failed to acknowledge some key market fundamentals.</p>
<p>This overconfidence causes expectations to inflate irrationally while sustaining buying, despite signs of overvaluation. This collective thinking creates a feedback loop where prices reflect sentiment rather than underlying value, often misleading late buyers into overpaying just before a collapse.</p>
<p>So, what are the signals that we watch for?</p>
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<h2><strong>Technical Answer</strong></h2>
<p>An easy one, but not always reliable.</p>
<p>I have maintained that technical analysis is useful but not surefire.</p>
<p>Markets sometimes follow strong and overwhelming price patterns, which give a powerful indicator of future price action. The trick is knowing when it is in that mode—or when the asset is looking elsewhere.</p>
<p>On the monthly chart, gold currently has an RSI (Relative Strength Index) of 90.5, which is extremely overbought and the highest in living memory. Periods of <a href="https://www.moneymetals.com/news/2025/10/02/gold-still-underowned-despite-surge-in-investment-demand-004377" rel="noreferrer">technically overbought conditions</a> have reliably been followed by sharp reversals.</p>
<p>Do I believe this parameter is important today?</p>
<p>No. We are in a new paradigm, and <a href="https://www.moneymetals.com/news/2025/10/09/with-gold-over-4000-mainstream-analysts-scramble-to-raise-price-forecasts-004395" rel="noreferrer">gold is being repriced</a> to reflect that.</p>
<p>Self-check: too much Kool-Aid?</p>
<p>I don’t think so.</p>
<h2><strong>Gold in Asia</strong></h2>
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<p>Asian buyers have an uncanny ability to read the market—perhaps having bought gold for millennia and not being so wealthy, either they have developed a keen instinct or simply it's encoded within their DNA.</p>
<p>Smart spot traders in the professional market typically keep a weather eye on this region—especially as it now accounts for over 50% of offtake globally.</p>
<p>Well, Indian demand, which is to my mind the most price-sensitive, has risen sharply with imports doubling last month according to a Reuters report, with prices trading at a $10 premium to Loco London—all things considered, unheard of. The polar opposite of what we should expect. They are clearly still very bullish.</p>
<p>Meanwhile, Chinese demand crashed as prices hit fresh all-time highs a few weeks ago but have just reversed, and we are seeing <a href="https://www.moneymetals.com/news/2025/09/30/asian-hubs-seeking-to-usurp-london-as-the-center-of-the-global-gold-trade-004371" rel="noreferrer">significant revived demand with Loco Shanghai prices</a> swinging from a massive $76 discount to a $5 premium today.</p>
<p><img src="https://www.moneymetals.com/uploads/content/China-Appetite-Gold-Ross-Norman-Metals-Daily-Money-Metals.jpeg" width="400" height="261" alt="" style="display: block; margin-left: auto; margin-right: auto;" /></p>
<h2><strong>Gold Speculators</strong> </h2>
<p>Perversely, I regard them as contrary indicators—if they are long, then, this being a zero-sum game, they are likely to bail out when the market loses momentum to the upside. They care not for fundamentals, just direction.</p>
<p>Well, the leveraged futures traders have, by and large, missed the boat. Prices rallied, and they were not aboard. So, no market overhang of weak hands. Another tick for “bullish."</p>
<p><img src="https://www.moneymetals.com/uploads/content/Gold-Price-Chart-Ross-Norman-Metals-Daily-Money-Metals.jpeg" width="400" height="198" alt="" style="display: block; margin-left: auto; margin-right: auto;" /></p>
<h2><strong>Buying Quality</strong></h2>
<p>Not all buying is equal. Long-term investors or reserve managers buying is, for sure, of higher quality than those with a short-term view. And it is my sense that much of the buying has been by ‘strong hands.’</p>
<p>If I am right, then they are unlikely to take profits, or the market to reverse on the way up. And we have seen that, with price dips being short-lived. Again, a tick.</p>
<h2><strong>Shoeshine Boy Moment</strong></h2>
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<p>This is the point where uninformed participants start to give their earnest and enthusiastic opinions. A warning sign that the market is gripped by a speculative frenzy or mania.</p>
<p>Shoeshine boy moments are typically anecdotal and therefore unreliable, but Google Trends is less so. By that reckoning, we might be seriously overbought, being at very high levels—‘might be’ because this counts media references and not engagement or purchases.</p>
<p>The reality is that participation, especially in the West, is light. <a href="https://www.moneymetals.com/news/2025/10/09/gold-etfs-record-record-inflows-in-september-004396" rel="noreferrer">ETF demand picked up from early September</a>, and physical coin and bar demand likewise saw a rise.</p>
<p>The upshot?</p>
<p>I think we are seeing the very early stages of a mania, but we still have a long way to run. And this is likely to increase with the equity market looking fatigued, priced as they are for a perfection that cannot happen.</p>
<p>So, watch for FOMO traders entering the market.</p>
<p>Sadly, it’s the uptick in speculative activity coupled with Western physical and institutional interest that worries me a little… perversely, IG publishes a gold client sentiment index which, on the basis that their clients are normally wrong, gives another good contrarian indicator.</p>
<p>Watch for narratives that focus upon future potential over present fundamentals, as evidence that this is getting too hot.</p>
<p>In short, I don’t think precious metals are gripped by irrational exuberance, but there is some sense that we are closer to the end of the move than the beginning of this move.</p>
<p>Put a number on it?</p>
<p>That’s hard… <a href="https://www.moneymetals.com/gold-price" rel="noreferrer">maybe $5,000 gold</a>, $64 silver in the next couple of years—but I really would be guessing, so don’t hold me to that.</p>
<p>Forecasting is a mug’s game at the best of times, but really foolhardy in the present one with markets so opaque. It all comes down to what level of gold holdings a number of central banks would have to hold in order to feel comfortable that they are adequately diversified. And that's really hard to judge.</p>
