The precious metals could be in for more pain.
That's what the charts are telling Matt Maley, chief market strategist at Miller Tabak, he said Wednesday on CNBC's "Trading Nation."
Gold prices have cooled off since hitting record highs Aug. 6, with the metal seeing its worst one-day drop in seven years on Tuesday. Silver prices also reversed sharply, their worst daily decline since 2008.
"Even though its long-term fundamental picture looks intact, sometimes on Wall Street when it gets so extreme, you see a reversal and one that lasts for more than just a few days," Maley said of gold.
He pointed to gold's relative strength index, or RSI, an indicator that measures overbought and oversold conditions. Last week, when gold was reaching all-time highs, its RSI was at heights not seen since the 1990s, he said. Silver's RSI revisited overbought extremes from 2011.
The momentum readings in the underlying ETFs were even more dramatic, according to Bespoke. The RSI readings on the SPDR Gold Trust (GLD) and iShares Silver Trust (SLV) hit records around gold's Aug. 6 peak, the firm said Wednesday.
"Also, we look at the daily sentiment index, which measures bullishness amongst futures traders, and it got to 93% bulls last week in gold. In fact, its nine-day average was over 90%," Maley said. "Again, when you get these kinds of extremes, it takes more than just a few days for it to work off."
Maley predicted that gold would soon retrace 50% of its recent move higher and fall back below $1,750 an ounce. Gold dropped about 1% on Wednesday to $1,926.20, while silver fell nearly 2% to $25.60.
"Silver I don't think would retrace quite as much, but I think it pulls back below 24 before you really want to back up," Maley said. "Still like them longer term, but short term, there's still some downside movement to work off this overbought condition."
Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management, largely agreed with Maley.
"Fundamentally, I think it's going to take a pause for a few different reasons," he said in the same "Trading Nation" interview.
Despite gold's impressive year-to-date performance, what was once a "safe haven" is now a volatile asset, Bapis said.
"Not only is the regular spot price high, but the inflation-adjusted price is off the charts as well," he said. "We would look to other alternatives such as market neutrals or global macro funds [that] will limit the volatility and they will be not correlated to the rest of the markets."
For investors who must own the precious metals in some form, Bapis suggested gold mining stocks. Gold miners are tracked in part by the popular VanEck Vectors Gold Miners ETF (GDX).
"Gold miners is probably the best way to play this space for the near future because they are companies, they're mining ... they're diversified in the space," Bapis said. "But I just think that the actual gold commodity ... and silver, for that matter, has just run up too far, too fast for no real fundamental reason."
Bespoke analysts noted that the past 11 times the GLD has experienced declines of 5% or greater, like it did on Tuesday, it tended to underperform over the next week and month. But over the next three, six and 12 months, the ETF has delivered above-average returns, with positive performance 60-70% of the time, analysts said.