BNN's Mark Bunting Has Some Cautionary Words

Over at BNN's blog, Mark Bunting points out that gold is quite overbought right now and could well take a tumble. The Relative Strength index is at 83, well above the 70 that indicates overbought. For this reason, we could see a backtrack soon.

He adds this caveat, though:

I remember a Market Call guest telling me that a stock, or gold in this case, can sail along at overbought positions for several weeks before it eventually corrects.

He includes the now-widespread possibility of gold going back down to US$1000/oz, but also notes that the retreat from overbought could mean a decline to about $1120-30. He also mentions a similarity between gold's price now and oil's when it spiked to $147, but is too cautious to claim an outright similarity:

I’m not saying that’s about to happen to gold seeing the long-term environment for the precious metal is bullish due to a number of factors including a weakening U.S. dollar, central bank buying and other forces. But, simply based on the RSI and the shape of gold’s chart, bullion is likely to lose altitude at some point soon.

The entire post is here.