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Gold Has Lost Its Trend

Jason Goepfert
2016-10-06
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Barring a hefty intraday reversal, the spot price of gold is about to lose its long-term trend. For the first time since February, gold is threatening to close below its 200-day average.

20161005_gold_chart

When this happened in the 1980s (several times) and the last time, in 2011, it led to protracted bear markets in the metal. But that accounted only for about half of the occurrences - the others led to almost immediate, and sustained, gains as we can see from the table below.

When gold is trading above its 200-day average, it advances at an annualized rate of 12.7%. When it is below its 200-day, that falls to 1.5%. So traders (and investors) are generally better off when it's trading above trend, or sentiment is showing excessive pessimism. Now both factors are against it.

20161005_gold

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