Where Are the Gold Technicals Pointing?



Gold gains while other precious metals tumble

Gold only slightly recovered on Thursday, August 4, 2016, after its fall on the previous day. Gold futures for August expiration closed at $1,367.4 an ounce, only 0.2% above their close on Wednesday. The rise in gold was unable to bring about a similar reaction in the other three precious metal counterparts. Silver, platinum, and palladium fell 0.14%, 0.39%, and 1.1%, respectively.

The call implied volatility in gold also dropped to 15.9%. The call implied volatility measures the changes in the price of the asset’s call option with respect to the variations in the price of the asset itself. Post-Brexit, gold witnessed a considerable hike in its volatility. It saw extreme gains as global markets were shaken.

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Technical indicators

Gold is currently trading at a premium of 6.5% to its 100-day moving average price. Also, it’s at a premium of approximately 1.6% to its short-term 20-day moving average price. Often, a substantial premium over the moving averages suggests a possible pullback in price.

The RSI level for gold is at ~63. An RSI level above 70 indicates that a stock has been overbought and could fall, while an RSI level below 30 indicates that a stock has been oversold and could rise.

Gold has seen a massive increase of about 29% year-to-date. The past one month was however comparatively slow, as gold has been reconciling after the Brexit results. The optimism for gold, however, has been buoyed by the global turbulence.

The rise in gold also brought positive returns for the precious metal mining-based funds like Sprott Gold Miners (SGDM) and the iShares MSCI Global Gold Min (RING). These two funds have seen a rise of 130.4% and 141.4%, respectively, year-to-date.


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