uploads/2016/05/Gold-Futures-Three-Day-Chart-and-Pivots-2016-05-301.jpg

Gold Slumps for 9th Straight Day: It’s a 15-Week Low

By

Updated

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.

Article continues below advertisement

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.

Advertisement

More From Market Realist