Is gold nearing a capitulation?

Gold bugs simply cannot catch a break.

The bullion breakdown continued on Tuesday, as the rising dollar and lack of inflation gave gold investors few reasons to buy the precious metal. Gold is now down 3 percent on the year, and is looking at its first back-to-back yearly losses in more than a decade.

But according to one technician's chart work, gold may soon be nearing a floor.

"I think gold is in the final stages of its decline from 2011 highs," said Mark Newton of Greywolf Execution Partners, who warned that it is still a bit too early to get bullish.

Newton noted that there are two positives to gold's decline: The presence of oversold conditions and overwhelmingly bearish sentiment. "Daily Sentiment Index (DSI) readings on gold hit 4 [Monday], the lowest I've seen this year, and typically single-digit sentiment signals that one should be on the lookout for a turn."

(Read: Gold edges up from 4-year low as dollar rally pauses)

But despite the lack of gold bugs, Newton did say the precious metal is likely to see another 4 to 5 percent downside before finding meaningful support. "As of right now it looks a little early to buy the dips," he added.

David Seaburg of Cowen and Co. said for the long-term trader, the fundamental picture for gold is grim. "There's weak demand out of India and China, the dollar is basically going in one direction—straight up, there's deflationary fears on the horizon."

Since gold is primarily traded in dollars, when the U.S. currency rises gold tends to fall. Gold is also seen as a hedge against inflation. With rates low, and the dollar surging, inflation has been well under control, leaving some investors with little reason to buy gold.

However, Seaburg did note that there is potential for profits in the short term. "When things get overblown to the upside or downside there's bound to be a move and I think we will see a move up here," he said. "If we trade above the $1,200-an-ounce level we could see short covering that would take [gold] even higher," Seaburg said. "I think near term there is a trade to be long gold, but long term the fundamental backdrop isn't there to support it."

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