Gold and silver technicals
On Friday, May 27, 2016, gold futures for August expiration saw their ninth straight day of decline. They touched their lowest level of $1,209 per ounce, closing at $1,216.70. The sudden fall in a matter of a few days caused the RSI (relative strength index) to fall to 34.3. RSI measures the undervaluation and overvaluation of an asset. An RSI above 70 indicates that a stock has been overbought and could see a downward revision. An RSI below 30 indicates that a stock has been oversold and could see an upward revision. With such a low RSI level, gold may become a candidate for an upward correction in price.
Silver has seen its RSI fall to 43.5 from 84 at the beginning of May. It fell about 2.9% on a five-day trailing basis. Gold fell 4.1% during the same period. The downward sentiment in gold saw it trading at its long-term, 100-day moving average of $1,216 per ounce. Silver was trading at a premium of 3.8% from its 100-day moving average.
A decline of $100
In May, gold fell a whopping $100 from its peak. The drastic fall is likely due to a stronger US dollar and the fear of a Fed rate hike. The dollar rose to 95.5 on Friday, May 27, causing a fall in dollar-based assets.
The negative sentiment in gold led to a fall in the SPDR Gold Shares (GLD) and the iShaers Silver Trust (SLV). They fell 6.5% and 9.4%, respectively, on a 30-day trailing basis. Mining stocks that have fallen the most over the past month include New Gold (NGD), Sibanye Gold (SBGL), and Gold Fields (GFI). They fell 20.6%, 25.1%, and 25.5%, respectively. Together, these three companies make up 8.3% of the VanEck Vectors Gold Miners Fund (GDX).
In the next part of this series, we’ll see what’s been happening with wagers on gold.