For technical buyers, institutional traders or individuals looking for investment strategy, the time to buy gold is now, according to the gold RSI. RSI is short for Relative Strength Index, a formula that considers gains and losses as a way to evaluate whether gold or any other asset is oversold or ready to make gains. This is a fundamental metric that can help investors plan their strategy, and this indicator currently sees gold as ready for a rise.
The RSI is written as RSI = 100 – 100 / (1 + RS)
RS = (total gains / n) / (total losses / n) and
n= the number of periods used to build the indicator
For gold, this formula shows a very clear trend; last week, the RSI fell from 49.5 to 38.5 as gold prices tumbled. RSI numbers near 30 indicate to analysts and other investors that an asset is undersold and a new climb may be impending. In short, gold was previously oversold, but the price drops of the past two months have corrected it, leaving gold prices likely to rise.
Technical analysis affects short-term decisions for gold prices; fundamentals, on the other hand, affect the long-term. Using the RSI for gold prices allows investors to evaluate both long-term and short-term due to the “n factor” in the equation.
As investors make plans, it is a good strategy to map out a way to capitalize both now and in the future. Gold bullion tends to be an excellent way to capitalize in the short-term, while certified coins offer a potentially good long-term approach. Using the RSI and other metrics, the time to buy gold appears to be now.
Steven Martin
Senior Gold Specialist - Buy-Gold.org
