Hawaii Six O - Gary Wagner
Fifty-Fifty, The Numbers To Watch In Gold
Kitco Commentaries | Opinions, Ideas and Markets Talk
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There are two critical numbers that gold investors and traders need to watch carefully for signs of support: fifty and fifty. The first critical number represents gold’s 50-day moving average. The second critical number represents a 50% retracement of the most recent rally. Interestingly enough, these two numbers intersect at roughly the same price point in gold.
Market technicians utilize the 50 and 200-day moving averages as key levels to determine whether a market is trending bullish, bearish, or neutral. The long-term 200-day moving average is used as a line in the sand to ascertain whether a market is currently bullish or bearish on a long-term basis. The 50-day average is used in the same context but for short and intermediate market assessments. These averages are also used together while looking for pivot points or key reversals when these averages cross.
When the shorter-term 50-day moving average crosses below the 200-day moving average, it is referred to as a dead cross. When the 50-day moving average crosses above the 200-day moving average, it is labeled as a golden cross.
A golden cross occurred in May as well as December of last year. The occurrence in May was a true golden cross in that the 50-day moving average had been trading below the 200-day moving average. The appearance in December was a point in time in which there was a convergence between the two averages until the short-term average for a brief moment crossed below and then immediately back above the longer-term 200-day average.
Currently, the 200-day moving average in gold is at $1290.50 basis the April’s futures contract. The 50-day moving average is currently at $1308.20. This is a strong indication that, on a technical basis, gold has been trading in a bullish environment.
As long as current pricing in gold remains above these averages market, regardless of whether the market is trending higher or lower short-term, we can expect to see higher pricing on an intermediate and long-term basis.
That applies to this current scenario regarding gold. Today market forces moved gold pricing dramatically lower intraday, trading to an intraday low of $1309. Currently gold is trading up $5.20 at $1319.80.
The Fifty Percent Retracement
The most recent rally in gold took gold pricing to a high of $1370, resulting in a net gain of $120. The 50% retracement of that price move occurs at $1306.70.
Both the 50-day moving average and the 50% retracement intersect just below the low achieved today.
This is significant in that the bounce off of those lows moving gold higher clearly illustrates that there is support at that price level. It is important because a 50% decline in gold pricing from the most recent rally is respectable and acceptable as a possible level in which this correction will conclude.
As long as gold pricing remains above the 50-day moving average, the intermediate and long-term forecast remain bullish. Therefore, this intersection between short-term moving averages and the 50% retracement is providing traders with a technical price point that has a substantial probability of major support in gold.
A break below could indicate a major shift in market sentiment from bullish to bearish. Until that point, we remain bullish for the intermediate and long-term forecasts.
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Wishing you as always, good trading,