Gold Might Be Getting Overbought

Igor Manukhov - Mar 24, 2023

Gold is approaching the $2000 mark on declining momentum. I would recommend waiting for a pullback to buy, but only if we continue to see an outperformance relative to stocks.

This year gold had been performing better than the stock market overall (green line and red line are starting to trend up, meaning that gold is exhibiting strength relative to Canadian and the US market respectively). It is possible however, that gold is starting to lose steam, heading into its all time high resistance.

First of all, the price itself is approaching a very important historical range of $2,000 - $2,100 (horizontal pink line). Notice how it failed to get through this level in the past. There seems to be too many eager sellers who flood the market when the shiny metal approaches this level.

Momentum is also starting to decline. Gold has been advancing while its relative strength index (RSI) failed to make a new high (marked with blue lines).

The RSI itself is getting close to a 70 reading (overbought). Notice how price tends to softened when its RSI gets close to 70 in the past.

Given these circumstances, I would not be in a hurry to buy gold right now. There is a good chance of price pulling back and consolidating. Given it's current outperformance, I would definitely keep an eye on it. If the price pulls back and gold continues to outperform stocks, it will be deserving of a place in your portfolio, in my opinion.

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Gold Might Be Getting Overbought

Igor Manukhov - Mar 24, 2023

Gold is approaching the $2000 mark on declining momentum. I would recommend waiting for a pullback to buy, but only if we continue to see an outperformance relative to stocks.

Igor Manukhov

Peter Kuntyj

Yelena Manukhova

Brittany Stone

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