On Tuesday I said that gold’s “latest rise is beginning to look very similar to the huge move made by silver back in April” of this year, right before it fell more than a third. Since then gold has fallen sharply, at one stage the yellow metal was down more than 11%.
1 Year Chart Of Gold
Gold’s big fall has taken it out of overbought territory and the RSI (Relative Strength Index) is almost back to neutral (circled). This is healthy corrective action for gold and despite its fall it remains well within the new steeper trend channel it established at the beginning of July.
Further downside is definitely possible especially if (as I suspect) Bernanke doesn’t announce fresh stimulus at the Jackson Hole symposium later today. That said, none of this has affected gold’s long-term prospects and in my view we are still on course to hit $2,000 an ounce by Christmas.