Gold just did this for the 1st time in 9 months

After rallying for months and generating the expected bout of excitement, the mainstay precious metal has lost its luster in favor of bitcoin. For the first time in nearly 9 months, gold has crossed below its 200-day moving average.

This ends its 10th-longest streak above its long-term average.

Gold falls below 200 day moving average

After gold ended other streaks of at least 100 days above its 200-day since 1975, it tended to resume its uptrend. Over the next month, gold rebounded more than 3/4 of the time, with a heavily positive risk/reward ratio. Returns across all time frames were consistently positive. 

It was a better signal for gold mining stocks. As was the case when gold first pulled back from a 52-week high as much as it did last week.

What else is happening

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  • Full returns in gold well ended a streak above its 200-day average
  • For gold mining stocks, too
  • What happens when gold suffers its first significant pullback from a new high
  • Fewer than 3% of gold miners are above their 50-day moving average
  • What happens when gold and the U.S. dollar fall together
  • It's been a historic 8 months for the S&P 500, Nasdaq 100, and MSCI All World indexes 

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Stat Box

The most important ETF in the world, SPY, gapped up more than 0.75% at the open on the first trading day of a new month, hitting a new high in the process. Every time it's done that since 1993, it showed a higher return 3 months later.

Sentiment from other perspectives

We don't necessarily agree with everything posted here - some of our work might directly contradict it - but it's often worth knowing what others are watching.

1. Bitcoin has become the place to be for speculators. Why bother with stodgy gold when you can enjoy $1,000 gains in a single day? By Tuesday, there was a record number of "active entities" either sending or receiving the coin, a record high. [Coindesk]

bitcoin volume

2. According to a Citi model (and pretty much all other ones, too), investors are back in the euphoria stage. Forward returns have been unkind under these conditions. [Liz Ann Sonders]

citi panic euphoria

3. Apply ice to burned area. Short-sellers are among the few who are decidedly not feeling euphoric nowadays. A basket of most-shorted stocks has not only hit new highs, it has done so in a parabolic manner. [Bloomberg via Liz Ann Sonders]

popular short seller stock basket

The post titled Gold just did this for the 1st time in 9 months was originally published as on on 2020-12-02.

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