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For the first time since January 2020, the 50-day moving average (green line) crossed below the 100-day moving average (magenta line), illustrated on today’s chart labelled as “C”. This is commonly referred to as a death cross. Most frequently the term is about when the 50dma crosses below the 200dma. However, it can be used as a term to describe whenever a shorter-term moving average moves below a longer-term one.

In the middle of January at the start of 2020 is the last time we had these averages cross back (item “A” on the chart) into a bullish alignment, (shorter above longer) when the 50dma moved above the 100dma. This correlation remained for the monumental rally lasting eight months that eventually brought gold to its all-time high. the differential between the two averages remained approximately $60 as they rose in unison for nine straight months. In the last week of September 2020, the difference between the two averages reached its widest distance of almost $100 (chart example B). The widening between the two occurred after gold was on its way down clearly showing how moving averages are by definition a lagging technical indicator. Then in October, we began to see the price difference between the averages contract which led to today’s death cross.

Currently, the 50dma in gold futures is fixed at $1908.70, and the 100dma is at $1910.60. On a technical basis, this is a bearish signal.

According to Investopedia, a death cross is, “a technical chart pattern indicating the potential for a major selloff. The death cross appears on a chart when a stock’s short-term moving average crosses below its long-term moving average. Typically, the most common moving averages used in this pattern are the 50-day and 200-day moving averages.”

The first takeaway mentions that this technical chart pattern has proven to be a reliable predictor of some of the most severe bear markets in the past century including 1929, 1938, 1974, and 2008. However, in the case of these examples of major bear markets in equities, it always is referring to the 50day crossing below the 200day. The opposite of this chart pattern is labelled a golden cross which indicates the potential for bullish price movement.

Investopedia explains this chart pattern signals short-term momentum is slowing, but it is not always a reliable indicator that the bull market is about to end.

“There have been many times when a death cross appeared, such as in the summer of 2016, when it proved to be a false indicator. Those who got out of stocks during the summer of 2016 missed the sizable stock market gains that followed throughout 2017.”

As we mentioned one major caveat to this technical pattern is that moving averages inherently by definition are lagging indicators.

Nonetheless in the case of gold pricing the fact that all three major averages, the 50, 100, and 200-day previously were in a bullish alignment since the beginning of February 2020. The fact that this is the first instance where the short-term moving average has crossed below a longer-term moving average since February of this year is ominous and truly a warning that we could see gold prices move lower.

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Wishing you as always, good trading and good health,

Author: Gary Wagner

Source: Kitco: Death cross signals potential for lower pricing in gold

Gold suffered this deepest single-day decline in the last seven years. Not since June 2013 has gold suffered a decline of this magnitude. The decline is a direct result of announcements made by two pharmaceutical companies, Pfizer and BioNTech which wrapped up stage III trials. The results showed that this vaccine had a 90% efficacy rate. The stage III trial administered the vaccine to 43,000 individuals, and the data concluded that the vaccine is 90% effective in preventing the coronavirus.

Dr. Albert Bourla, Chairman and CEO of Pfizer said that “Today is a great day for science and humanity …The first set of results from our Phase 3 Covid-19 vaccine trial provides the initial evidence of our vaccine’s ability to prevent Covid-19.”

In a statement, he also said that the company is “reaching this critical milestone in our vaccine development program at a time when the world needs it most with infection rates setting new records, hospitals nearing over-capacity and economies struggling to reopen.”

The COVID-19 pandemic has reached epic proportions with 10,023,275 cumulative infections in the United States, and 237,760 lost lives in the U.S. alone where the pandemic has registered two consecutive days of 100,000 new cases. There have been over 50 million reported cases of the virus resulting in 1,260,768 deaths worldwide. With so many new daily cases occurring a vaccine cannot come quick enough.

Pfizer pharmaceutical said it will produce 50 million doses in 2020, and up to 1.3 billion vaccine doses in 2021. U.S. equities traded sharply higher on the news, with the Dow up over 1,000 points.

Silver sustained a 5.5% price decline with December futures currently fixed at $24.245.

Gold futures had been trading higher overseas as the markets opened first on Monday in Australia. It traded to an intraday high of $1966 before the announcement of a viable vaccine. As of 3:44 PM EST December futures are currently fixed at $1865.50 a decline of over $86 (- 4.42%). Dollar strength certainly provided headwinds, however, today’s gain in the dollar index was just over half percent, which means that selling pressure accounted for the remaining 4.01% in gold futures.

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Wishing you as always, good trading,

Author: Gary Wagner

Source: Kitco: Gold drops dramatically, as BioNTech and Pfizer announce vaccine trial results

On Friday gold futures closed up in double digits with a net gain of over $20 on the day. This led to the only time we see gold prices gap extremely higher, or lower; the weekend. As gold reopened Monday morning in Australia it did so with a powerful upside move. After closing just above $1643 per ounce on Friday, gold prices opened at $1656 and then began a substantial, but short-lived rally, taking prices to $1691.70.

Obviously, this is the highest price gold has traded to this year. Even more significant though is the fact that you have to go back to February 2013 to see the last time gold had challenged $1700 an ounce, the current elusive brass ring.

As of 4:15 PM EST, Gold futures bases the most active April contract is up $13.40, or (+0.81%) and fixed at $1662.20. The dollar index is basically neutral today currently up +0.02% and pegged at 99.21. This indicates that the large increase in price was due completely to traders bidding the precious metal higher.

This spike occurred as the Dow Jones Industrial Average sold off sharply losing 1031.61 points and closing at 27,960.80. Essentially U.S. equities sustained losses greater than the gains achieved during 2020. On a technical basis the retracement of today’s move alone occurred at the 78% Fibonacci retracement level after the Dow gave up 3.56% of value today.

While the World Health Organization is currently acknowledging that the COVID -19 continues to spread to other countries, they are hesitant in relabeling this epidemic which occurred in China as a pandemic which would mean that it is spreading worldwide.

As reported in MarketWatch, “The World Health Organization (WHO) said Monday that the coronavirus that broke out in Wuhan, China, late last year is not a pandemic. WHO Director-General Dr. Tedros Adhanom Ghebreyesus said the virus, named COVID-19, is not spreading in an uncontained way. “What we are seeing are epidemics in different parts of the world,” he told reporters on a conference call. The WHO said earlier there are now 79,407 cases of COVID-19 in 30 countries and 2,622 deaths. The rapid uptick in the number of COVID-19 cases in Iran, Italy, and South Korea over the weekend sent markets tumbling Monday over concerns that the outbreak would turn into a pandemic.”

However, there are those experts that gravely disagree with the forecast from the WHO. Today Yahoo! News reported that Harvard University epidemiologist Marc Lipsitch is predicting the coronavirus “will ultimately not be containable” and within a year, “will infect somewhere between 40 and 70 percent of humanity.”

Lipsitch does not believe the virus can be contained because it differs from viruses like SARS and MERS, in that infected individuals do not show symptoms for an extended period of time allowing them to infect others. In fact, according to the Atlantic epidemiologist Marc Lipsitch is not alone, and there is emerging consensus that the outbreak will eventually morph into a new seasonal disease which could one day turn the cold and flu season into the cold and flu and COVID-19 season.

If these predictions come into fruition, we could see an extended and major global impact on economic growth which would pressure global equities and be extremely bullish for the safe haven assets such as gold and bonds.

Author: Gary Wagner

Source: Kitco: Volatility ramps up in gold as COVID-19 spreads

The entire precious metal complex experienced a moderate gain today. Gold as of 3:30 PM EST is currently trading at $1471.50, which is a net gain of three dollars on the day. The moderate gains in gold pricing can be directly attributed to two primary factors. First is dollar weakness, the dollar index currently down .23%, and fixed at 97.645. Second is a lack of clarity in terms of the current negotiations between China and the United States.

Currently both superpowers have been in intensive negotiations to come to a partial and interim agreement called “phase one.” However, there is a real lack of clarity in terms of any real progress, and when negotiations will yield an agreement that both countries will sign.

On Friday of last week news that both sides were coming closer to the final draft of the phase one agreement put pressure on gold pricing which had hit a low of $1446 on Tuesday of last week and then recovered trading higher on Wednesday and Thursday. On Thursday of last week gold futures closed at $1473 per ounce. These gains were short-lived when on Friday gold prices declined closing at $1468.

Today U.S. equities were slightly higher, but quickly gave up those gains as news showed a much more pessimistic outlook as to “if” and “when” negotiations would yield an agreement that both countries would sign. According to Reuters, this pessimism came after “Chinese state media said on Saturday that the two sides had held “constructive” trade talks, days after White House economic adviser Larry Kudlow said they were close to a deal.”

According to an article published in CNBC today, the “mood in Beijing about trade deal is pessimistic, government source says.” Penned by Yun Li the article mentions that the Chinese officials were troubled by Trump’s comments that there was no agreement on phasing out tariffs. This information came from a Chinese government source and was told to CNBC’s Eunice Yoon.

One thing is for certain, and that is that the spin being reported by both sides of the trade dispute can completely change from one day to the next. The lack of clarity and real certainty as to how close both sides are to reaching an agreement seems to be the one and only constant in the trade war negotiations. After 18 months of negotiations any progress has been temporary and short-lived. While it is obvious that neither country can come to a common ground with any long-term agreement, it seems at least for now that the two superpowers cannot even reach an interim agreement.

Author: Gary Wagner

Source: Kitco: Trade War Uncertainty Results in Dollar Weakness and Moderate Gains in Gold

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