144

The 144-day moving average of gold, as discussed in the comments of an earlier post, appears to be significant: it's been the lower bound for the price of gold since early 2009. Incidentally, contrary to what I thought, the number 144 isn't quite random - it's a Fibonacci number.

Many have noticed how many times the price of gold has bounced off of its 144-day MA over the past few years (see blue dotted line on chart below). But, what's also remarkable is how linearly the moving average has increased since it began its upward trend in mid-February 2009. (Linear on a logarithmic chart, reflecting growth at 27% a year.)

I fit a regression line to the price of gold since early 2009 (not shown). The slope of that line has remained almost constant for years, and importantly, appears to have the exact same slope as that of the regression line of the 144-day MA (see brown line on chart below). Also note the grey dotted lines, representing ~1.25% in either direction of the 144-day MA's regression line: it's never gone beyond that.

This steady rate of increase of the moving average seems a little too perfect for me. Remember, this has been going on since gold was in the low $800's. It fits perfectly with what Bill Murphy of GATA has called a "managed retreat" by the banking cartel, and what Jim Rickards has explained is the government's wish with respect to gold: they want it to increase in price (i.e. they want the dollar to lose value) -- as long as it happens in a controlled manner.



Obviously, this trend won't go on forever. But what if it goes on for the rest of the year? Let's assume that the 144-day MA will indeed continue to trace the brown regression line on the chart above (or oscillate between the dotted grey lines, at any rate). We can then get a good prediction of the actual price of gold on any given day. That's because, with every passing day, we know which number will drop out of the 144-day moving average (e.g. tomorrow, gold's price on November 12, 2010 -- $1388.50 -- will drop out). Therefore, if the average is to continue increasing at 27%, we also know how much the gold price has to rise.

The x-axis of the chart below represents days since February 12, 2009. The y-axis marks the value of the above chart's brown regression line. If the 144-day MA continues its 27% rate of increase, then it should hit $1600 around November 21, 2011. If that's going to happen, then the price of gold has to average $1620 until then. If we imagine, for simplicity, that the price of gold increases at a linear rate forward from here, then it would have to go up about $1.40 a day, and reach $1700 on November 21, 2011, for the 144-day MA to be at $1600 on that date. It can of course fall $50 today and still end up averaging $1620 a day by November 21, but the more it falls in the short term, the higher than $1700 it would have to be by November 21 for the condition to hold.