Don’t Be Too Bullish On Gold

Gold has been getting crushed recently, and now sits near several support levels.

 

As a result, gold’s weekly RSI has become “oversold”.

 

Meanwhile, NUGT (gold miner’s 3x leveraged ETF) just spiked. This has some people thinking that big buyers are turning bullish on gold in anticipation of a relief rally.

 

So should you turn bullish on gold?

No.

Here’s what happens next to gold when its weekly RSI (momentum indicator) falls below 33 for the first time in 3 months. 

 

Click here to download the data in Excel.

Conclusion

When gold’s weekly RSI falls below 33, it tends to go down in the next 3 – 6 months. This is because gold doesn’t usually experience such weak momentum during bull markets. Weak momentum like this signals that gold is still in a bear market. Hence, it will probably make a bullish weekly RSI divergence before bottoming.

This is a medium term bearish sign for precious metals.