Gold (XAUUSD) surpassed $4,000 per troy ounce for the first time this week, although the precious metal is now trading back below the key level.
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Gold is having its best year since 1979, driven by central bank buying, strong ETF flows, and the “debasement trade,” or a push into gold, cryptocurrencies, and other alternative assets as a safe haven against a weakening dollar. However, gold faces “exhaustion” around $4,000, according to Bank of America.
Gold’s Record Run Faces Elevated Correction Risk, Says BofA
The bank points out that gold has remained in overbought territory for a month based on its 14-day relative strength index (RSI). Furthermore, bullion has risen for seven consecutive weeks. In this scenario, it has historically traded lower “11 of 11 times four weeks later and 10 of 11 times five weeks later.”
Bank of America adds that the risks of “a consolidation or correction” are elevated and could emerge during the fourth quarter.
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