A Key Threshold for Gold

After soaring nearly 40 percent from a low in March to a record high above $2,000 an ounce in August, gold pulled back 14 percent during autumn. At the end of November, the price of gold dipped below its 200-day moving average for the first time in nine months. That’s a critical threshold.

Get in on gold before its price increases.

A 200-day moving average is an important support level for commodities, like gold, as well as for stocks. Holding above the level indicates the investment remains in a long-term uptrend; falling below often points to the end of a bullish run.

After trading for two days below the 200-day moving average, gold responded by bouncing back over the threshold during the first week of December, an encouraging sign that the precious metal’s bull market remains intact.

This is precisely what gold did in March. It briefly dipped below its 200-day moving average, then proceeded to rally from the $1,500 level all the way to above $2,000.

Investors should not anticipate such a dramatic climb again. But history is encouraging. When gold dips below its 200-day moving average, after having been above the line for more than 100 days, it tends to resume its climb, according to Jason Goepfert, President and CEO of SentimenTrader. He points to 14 cases since 1978. The precious metal climbed higher more than 70 percent of the time over the next six month and one-year periods. The median returns were 4.3 percent after six months and 9 percent one year later.

Get in on gold before its price increases.