Gold Closing in on 20% Above 200-Day Moving Average

Gold's move over the past couple of months has been pretty incredible but not without precedent.  As shown in the first chart below, the most recent leg up for gold has put it at 19% above its 200-day moving average.  In the second chart, we highlight the historical 200-day moving average spread for gold.  As recently as 2006 and 2008, the 200-day spread moved well above 25%, and back in 1980, the spread briefly got up to 136%!  Gold is definitely overbought right now, enough so that the risk/reward tradeoff in the short-term is probably favoring the risk side.  However, it has gotten much more overbought in the past than it is now, so it could still go higher before correcting.

 

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Comments

[yo]

looks like we have a target of 140% above the 200day. yowsa!

[djvu]

great post!! was looking was this kinda info.
yes my interpretation of this - gold being 20% above 200 DMA is very bullish indeed.This is a 2 zigma move that increases the probability of higher moves to 3 sigma. that is say +30% above 200 DMA.
Please give us more on the same lines for eg. 200 DMA spread of Oil.

[time123]

It appears to be bullish longer term, but bearish short term.

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[Jim P.]

Trader-Tax is back on the table in Jobs Bill:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1mC.vDFKsw4

Wondering if you had an opinion on how this will impact the market.

Regards, Jim P

[Stefan]

The current gold bullmarket started in 2000. This leg up that started a couple of months ago looks similar to the ones in 2006 and 2008 so the spread could easily move to +30% which gives a target of at least $1300. There were some minor corrections in 2006 and 2008, but they didn´t exceed -5%...

Here´s a chart I created yesterday on the same theme as the Bespoke post:

http://3.bp.blogspot.com/_0gdArv9HrRE/SwXCrKI3plI/AAAAAAAABBU/tuHWOcXrgTc/s1600/Gold+091118+m%C3%A5lniv%C3%A5er+2010.png