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Gold has been this overbought only three times in two decades

Will history repeat itself?

Gold is almost guaranteed to record losses in the next two weeks, if history is any guide.

The 14-day Relative Strength Index for the yellow metal soared to 86 on Monday, well above the level of 70 that typically suggests securities are overbought. Previously, there have been only three times since 2000 when the RSI rose above 85, and in each instance bullion fell over the next 10 trading days. The loss averaged 1% compared with a gain of 7% over the previous 10 session.

Read: Gold hits highest since 2013 as Goldman backs bullion in crisis

To be sure, in all three occasions — October 2010, February 2016 and June 2019 — gold eventually resumed its rally. But the momentum had slowed. Gold performs best when interest rates fall and the dollar weakens. Without a further escalation of Middle East tensions, the bulk of the moves in rates and the dollar may be over for now. And the same is probably true for the bounce in gold, at least in the short term.

© 2020 Bloomberg L.P.

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If Goldman’s are putting money into gold at these prices and former defunct Goldmines are being restarted, perhaps this spike is different? Time will tell.

Best ZAR hedge ever since collapse of the gold standard.

Every citizen should have gold in their portfolio, even if only in small 1g amounts.

I don’t just buy gold because of current events and political and financial instability. I buy gold to protect myself from the Rand. I only wish I had started in 1994. Anyone betting against gold is stupid and delusional.

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