{"id":36425,"date":"2013-02-25T14:06:05","date_gmt":"2013-02-25T19:06:05","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=36425"},"modified":"2013-02-25T14:06:05","modified_gmt":"2013-02-25T19:06:05","slug":"this-hasnt-happened-to-gold-since-1998","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/02\/25\/this-hasnt-happened-to-gold-since-1998\/","title":{"rendered":"This Hasn’t Happened to Gold Since 1998"},"content":{"rendered":"

By Chris Hunter<\/strong><\/p>\n

The last three weeks have been torrid for gold<\/strong><\/a> investors. Over that time, the gold price has fallen by about $100 — a loss of about 5%.<\/p>\n

And unless gold closes above $1,605\/oz gold will see a “death cross” of its 50-day and 200-day moving averages.<\/p>\n

\"GOLD
\nView larger chart<\/a><\/p>\n

In other words, its 50-day moving average will cross below its 200-day moving average — which hasn’t happened since 1998.<\/p>\n

I don’t recommend you try to trade gold. Instead, you should think of gold as a form of “cash” that central banks cannot print.<\/strong><\/p>\n

Gold is an honest currency. You own gold because it makes more sense
\nto keep some of your cash out of the reach of overzealous central
\nbankers. In other words, gold is not an “investment” in the traditional
\nmeaning of the word. So these kinds of short-term moves are not hugely
\nsignificant.<\/p>\n

That said, you need to keep an eye on whether one of these short-term moves breaches a longer-term trend.<\/p>\n

This hasn’t happened yet. But I’m watching the $1,520\/oz level
\nclosely. That’s because since September 2011, gold has been trading in a
\nprice range between about $1,520\/oz and $1,800\/oz. So a definitive
\nbreak below $1,520\/oz would be something entirely new… and not at all
\nbullish.<\/p>\n

There have been eight “death crosses” in gold since 1975. And
\nalthough the average returns for the following week and month have been a
\ngain of 0.69% and 0.5% respectively, the returns over the following
\nthree months and six months have been mostly negative (-0.64% and -1.56%
\nrespectively).<\/p>\n

The last time we saw a “death cross” in gold, in December 1998, gold
\nfell more than 10% over the following six months. If we see that kind of
\ndecline again this time around, it would put gold at $1,424\/oz six
\nmonths from now (a rupture of its recent trading range).<\/p>\n

There are many drivers of the gold price. Weak demand from India and
\nthe recent Chinese Lunar New Year celebrations would certainly have a
\nbig impact.<\/p>\n

But we also have an increasingly complacent investor mindset in
\ndeveloped world economies, where stock markets are rallying in
\nconjunction with massive central bank stimulus. The “fear factor,” in
\nother words, is significantly lower today than it was at any point in
\n2012.<\/p>\n

To be honest, it’s hard to make sense of the gold sell-off. Central
\nbanks around the world are aggressively printing money… and yet the
\nworld’s only unprintable currency — gold — is selling off. Gold mining
\nstocks<\/strong><\/a> are also suffering badly and have reached multiyear lows.<\/p>\n

Is there forced selling going on somewhere? We know George Soros has
\nunwound a big position in gold ETF GLD. Is there some big gold trade<\/a><\/strong> unwind going on we don’t know about? Sure feels like it.<\/p>\n

The fundamentals, as we see them, are still supportive of gold.<\/strong>
\nEvery developed country is now printing money without limit. And 38
\ncountries around the world are pursuing a zero or negative real interest
\nrate policy. Now is not the time for gold investors to panic.<\/p>\n

Gold has been in a secular bull market for over a decade. But it is
\nnow down more than 10% from last October’s 52-week high — putting it
\nofficially in correction territory.<\/p>\n

That is normal for an asset that has been in bull mode for so long.
\nFor now, just remember that nothing goes up in a straight line. And be
\nprepared for further price weakness over the short term.<\/p>\n

By Chris Hunter<\/strong><\/p>\n

http:\/\/www.insideinvestingdaily.com\/<\/a><\/strong><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Chris Hunter The last three weeks have been torrid for gold investors. Over that time, the gold price has fallen by about $100 — a loss of about 5%. And unless gold closes above $1,605\/oz gold will see a “death cross” of its 50-day and 200-day moving averages. View larger chart In other words, … <\/p>\n

Continue reading “This Hasn’t Happened to Gold Since 1998”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-36425","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/36425","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=36425"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/36425\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=36425"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=36425"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=36425"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}