Gold beginning to look oversold

Today has seen gold halt the momentum lower, after breaking below both the 50- and 200-day moving averages in the last couple of days.

Over the course of the week gold has fallen away by $50. There might be a temptation just ahead of the weekend to square-off positions, especially with the possibility of situations arising to destabilise the current calm global outlook.

The last couple of weeks have now seen over $100 taken out of the gold price and around half the gains for the year lost. Looking at the 10-day relative strength index, it is now indicating that the precious metal is in oversold territory and that could attract bargain-hunters back onto the scene.

The US Federal Reserve has brought a potential timeline for raising interest rates back into the equation. This has highlighted gold’s Achilles heel of being unable to generate an income. A short period below the $1300 level could be interpreted as support being tested however, and a sustained period below could be the trigger for greater losses.

Spot gold chart

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