Two gold charts

I looked at the price of gold since March 6, 2009, that fateful day when the Dow fell to 6400, and heretofore the low point of the recession from which we can't seem to recover.

Rather than draw trend lines, I decided to look for natural boundaries, such as moving averages. Data dredging, if you will.

The 145-day moving average, which, granted, you never hear about, nonetheless seems significant. Gold has not yet gone below it. Rather, it has bounced off of it emphatically 4 times (and just missed it another 3 times) in the last 2 1/4 years. If gold were at its 145-day moving average right now, it would be at $1419.89. We're pretty far from there, which is encouraging. Looks like, even if gold were to have a $100 decline this summer, you shouldn't panic, but rather back up the truck.
What about upper bounds? Over the past 2 1/4 years, the upper 5% envelope of its 20 day exponential moving average has been almost perfect. It's bounced off of it too many times to count. Gold would have to be at $1592.36 today to touch it, at which point shorting would probably a really good idea.


Next, I wanted to look at a monthly chart of gold for the duration of its latest secular bull, the beginning of which I deemed the month gold broke $300 for good. Looks like we're quickly approaching the vertex of a rising wedge that began in 2008. Technically, that's bearish, or so I've read. But bullish or bearish, whichever direction it turns, it certainly looks to me like this summer will mark a violent entry into a new phase.



* Update: Those of you with nothing to do may be interested in my revised interpretation of the monthly chart.

In the new chart below, I've drawn a red dotted line, which has been long term resistance for gold, and I see no reason why that should change. Gold touched the red dotted line in 2003, then not again until summer 2006. Looks like a similar thing may be going on 2008 --> summer 2011. The 1.5 year RSI is over 70 again, and if the pattern repeats, looks like it will approach 80 in the coming months, before a serious correction.

I've also drawn a new rising wedge, with this in mind: in March 2008, gold tested the red dotted line, then closed the month down about 7.5% If we start the blue trend line from that point, we see that the wedge was broken to the upside in April. Rising wedges are supposed to be bearish, but then I think that's in an overall bear market.

9 comments:

Jeanne d'Arc said...

Very persuasive charts there, GM.

You're right about the 145-day moving average not getting much attention. There's been a few articles on the gold 144-day moving average, though (what's a day between friends? :-) ) I used these to reassure myself during the January correction, and would encourage others to do the same.

When the 144-day moving average is broken, however, (and one day it will be, whether it be days, months or years) we're into scary uncharted territory...

Louis Cypher said...

At the request of a couple of posters I am removing some posts. Don't read into it more than there is. They simply decided what they wrote didn't really represent their thoughts. Just a bad hair day.

GM Jenkins said...

There's been a few articles on the gold 144-day moving average, though (what's a day between friends? :-) )

D'oh! Get a load of that! Google gives me something on the order of 3 billion articles on the 144 day moving average. Reminds me of a scientist I once knew, who spent 10 yrs of his life following a lead, only to realize upon discovering a new cell organelle that it had been previously described. About 30 years earlier. Alas, he didn't have the benefit of google. Poor guy became an alcoholic, and in his honor I've just popped open a Murphy's Irish Stout.

Jeanne d'Arc said...

GM - Ah, once I found a beautiful blue lizard with an orange head, living down an obscure wadi in an obscure desert in an obscure country. I was convinced it was a new discovery, and excitedly fired off photographs to zoologist friends. I keenly imagined the unveiling of Acanthocercus jeannedarcus to an excited collection of herpetofauna experts.

Alas, it had been first described in 1952. La honte...

GM Jenkins said...

Reminds me of the time I went to Vegas with an entomologist, world's foremost expert on tiger beetles, who wanted to find a rare species imputed to inhabit some mountain there. (Vegas has mountains - who woulda thunk it?) After nearly missing my flight trying to convince security that my telescoping butterfly net wan't a weapon (angry black guy looks at me incredulously: "a butterfly net in Vegas?"), we eventually make it to the mountain, where my friend spots one within 10 minutes, sitting by some log, and tells me to go ahead and try to trap it with my net, to give me the pleasure of catching the thing or whatever. I whiff at it and scare it away. Long story short, two days and 15 hours of trekking later, we go home empty handed. Good times...

Jeanne d'Arc said...

That must have really bugged you...

Chortle, chortle...

Brian said...

seriously, you all are a little weird. my idea of fun in vegas is dropping a few hits of e, going out to a club, dancing with some chics wearing butterfly wings and getting crazy while not sleeping for a couple of days.

regardless i really like you all and love this site.

GM Jenkins said...

Re-reading my story just now, I'm not sure if I properly got across that the first rare tiger beetle we saw, within 10 minutes of our exploration, which my friend could've easily caught, was the *only one we ever saw.*

There's clearly an important and widely applicable lesson to be learned here, which is why I bring it up. Namely, when in Vegas, don't waste time looking for insects no-one gives a shit about when you can be dropping a few hits of e, going out to a club, dancing with some chics wearing butterfly wings and getting crazy while not sleeping for a couple of days.

GM Jenkins said...

Breaking news: I added a new chart to this post.