About Gold And The 200 DMA

Tyler Durden's picture

Many are doing their damnedest Ph.D.-best to somehow fuse economic theory and technical charting, and state that a breach of the 200 DMA in gold is indicative of imminent price collapse. And then there are facts. Such as this nugget from Stone McCarthy which looks at previous episodes of the 200 DMA breach and concludes based on severity of trendline penetration compared to average, that "this is just one reason we see strong potential for a rebound as participants reduce short exposure." So much for technicals.

Full note from SMRA:

For the first time since January 2009, gold closed below its 200-day moving average on Wednesday. Today's Chart of the Day puts Wednesday's -2.8% violation of this long-term smoothing line into perspective, by comparing it to the average violation of both the general and upward sloping 200-day average since 1999.


The slope of a moving average is something that many analysts fail to address when trying to determine potential turning points on a chart. Although gold has been working lower for more than 3 months now, the current upward slope of the 200-day line reinforces the fact that gold's long-term trend is still to the upside.


If we simply consider the general direction of the 200-day moving average since the start of the yellow metal's secular bull move in late 1999, gold's average distance below this line is -3.70%, with a maximum undercut of -19.2%. On the other hand, if we only consider gold's performance when the slope of the 200-day line is higher, the average violation is -2.19%, with a maximum undercut of -10.8%.

And SMRA's short-term preice implication conclusion:

On its own, gold's -2.8% violation of the 200-day line on Wednesday has already surpassed the average violation dating back to 1999. Short-term, this is just one reason we see strong potential for a rebound as participants reduce short exposure.

Lastly, absolutely none of this matters one iota when the central banking cartel resumes printing.

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holdbuysell's picture

The last I checked base money has continued to grow.

Harlequin001's picture

Really, who gives a shit?

Central banks are buying, so who's selling?

Gold buyers see no fundamentals in paper money and in that nothing has changed, so since when does a breach of the 200 DMA make any difference?

trav7777's picture

it pretty much slashed right through it, never a good sign

but life could be worse, you could be a silverbug

Harlequin001's picture

If silver drops through $27 I'll be changing more gold for silver, and more at $25, $20 and so on.

I don't have any issues with holding silver...

but it will be nice eventually to be back 90% gold 10% silver and without the volatility once the price has popped...

tooktheredpill's picture

gold, silver, up, down, techicals, who knows. I remember being in NY back in April and being bombarded endlessly with mindless ads where Joe Bloggs and Mary Jones are buying gold and then so should you. I couldn't help but think they were trying to squeeze the last little bit out of the market.

Harlequin001's picture

Who gives a shit about technicals in a manipulated market. My only interest is that silver is more volatile, so buy it when markets are down and move to gold when they're up.

Simple stuff, really...

French Frog's picture

Looking at the "% below the uptrending 200ma" graph, there are also 3 spikes to -5% and 1 to -10% since 1999 so rather than taking an average of -2.8% for entry, i would scale-in and not be all-in at these levels.

It's all very well looking at the -2.8% line, but maybe a 1/3 entry here and another 1/3 entry at -5% (if seen around 1538) and finally keeping a last 1/3 for the -10% scenario (currently at 1457).

Knowing how easily paper shorts can be issued by those who want the price of gold down and bearing in mind that "at the moment" it is easy to frighten the weak long hands by pushing the argument that there might not be any 'real' QE coming out of the ECB, i would be a bit conservative at these levels.

Also bear in mind that the -5% (1538) very nearly coincide with the last low at 1531 + the current trendline from the 2008 lows is at 1534; that's a lot of reasons why we're likely to visit this area before another move up but a break of that and the paper producing short machine will go into overdrive and we'll likely see the 1465/75 area.

Smiddywesson's picture

If silver drops through xyz I'll do absolutely nothing.  All of the misteps and bad luck I have had over the last few years has been responding to anything these monkeys do to the PM markets.  I did ok trading paper, and I think I know the game well enough to pick up some fast cash during the pm shorts to come, but we seem close enough to end game to focus exclusively on well timed stacking of physical.  (No offense intended to paper traders)

SRSrocco's picture


During the takedown yesterday in silver, Apmex sold over 40,000 American Silver Eagles.  I would assume if we include all the other large online precious metal dealers like Tulving and etc, probably at least 100,000 of these went out the door.

The more the paper price of gold and silver fall, the more phyiscal buying comes in.  I am simply amazed at the lack of understanding by those who should know better on what money really is.  One fella told me that a Federal Reserve Note is backed by the GDP of the country.  As you can see, there will be a lot of Assumptions flushed down the toilet along with pension plans, 401k's, IRA's, CD's, Bonds and etc when the US Dollar finally dies.

Technical Analysis is dead.  Silver should be trading at least at $150+ an ounce.  To say it was overbought at the end of April of this year at $49.50 is silly to say the least.  In my book its still a huge balloon held 500 feet underwater.

Again, it takes patience to watch the Clowns like Gartman on CNBC regurgitate rubbish that GOLD IS IN A BUBBLE.  Gartman needs a goat milk enema as it looks like the stress of bending over to his paper masters is taking a toll on his body and appearance.

Lastly... the US Dollar does not have a lot of time on its side.  This may be one of the last greatest opportunities to finally rid oneself of worhtless paper assets and put them into physical ones before the PHAT LADY SINGS.

Harlequin001's picture

I agree, Op Twist is about the last or near to the last means of creating money without visibly printing it.

Two months maybe three before Bernanke has to either print or suffer a liquidity induced collapse of his paper and then bang goes the pm prices.

When rates rise and Bernanke can no longer print there will be no more cheap cash with which to short pm's wheat, corn or any other commodity and then you'll see prices fly.

Until then, I couldn't give a stuff about any 200 DMA, never did...

Smiddywesson's picture

LOL SRS, you just called the end of the USA.  Timing a 37 year collapse is difficult enough, but it's impossible here because the Bernank can print just as much as the thirsty banks need to keep things staggering along while he and his counterparts stack gold.  Yes, it's all going to collapse, but it ain't over yet.  There's at least one or two pm smack downs left in the system before it collapses.  At the very least.

trav7777's picture

wow...a whole 100k oz in a sea of 800Moz *annual* production.  You bugz better get busy

Pladizow's picture

What the fuck is wrong with you?

oddjob's picture

His barrels of oil are blocking his driveway, its a blight on the neighborhood.

akak's picture

What the fuck is wrong with you, Trav?

The allowable length of a single ZeroHedge post is not sufficient to answer this question.  But if I may grossly condense the answer:

  • A collectivist mindset
  • Fear and hatred of darkies
  • Jealousy for having been proven wrong on silver
  • Self-loathing for having prematurely sold his silver
  • Blind, sweeping hatred in general
  • A bitter and execrable personality
tmosley's picture

*Implying that ASEs are the only form of silver.

*Implying Trav is an idiot.

Sudden Debt's picture

Not if you're living in Europe! :)

Silver eagles still selling at 32 euro per piece.

And I don't sell. I just wait. and buy. and wait. and buy. and wait....

Ratscam's picture

just bought some in CH for 30. i guess the VAT makes the difference :)

XitSam's picture

How popular are Silver Eagles outside the USA?

Ratscam's picture

not so much the silver eagles rather the canadian maple leaf and the austrian philharmonic - very much in favor but definitely never a problem to buy here within two days from any swiss bank

clones2's picture

Some of you gold bugs need to chill the hell out. :-)

The FACTS are that Gold did slice right through the 200dma.  And if you look at the chart of Silver and Gold - you can see two perfect head and shoulder breakdowns.  Both have been nailed hard the past 4 months...  This stuff does trade on technicals as well, and if you look at some of these textbook moves on the chart - thats hard to argue.

Also, I really haven't seen anyone calling for an "imminent collapse" because of the 200dma breach.

Note: Silver and Gold are GREAT long-term investments - I do not debate that.  But we have also seen a major bull run the past few years - and without major money printing or QE before an election in 2012.  There may not be much reason to bounce hard from these levels.

Wouldn't be surprised to see another 10% fade and consolidation the first half of 2012... 

Fundamentally... I am on your side!  Technically - I'll wait a little bit to buy more.

trav7777's picture

agree...it went thru the 200 like it wasn't there.  Expect a retest and then place your bets

Harlequin001's picture

The European banking system is in full collapse, why are we even discussing a 200 DMA?

Whatever happens, I'm still going to hold just as much gold and silver, it will just be worth more when I convert it back to US dollars and spend it.

I'm chilled...

akak's picture

The European banking system is in full collapse, why are we even discussing a 200 DMA?

Agreed.  One (rationally) does not alternately cancel and then repurchase their home insurance policy based on their daily estimation of the risks of fire or flood, nor does it make sense to suspend one's fire insurance policy in the midst of a raging wildfire merely because one suspects that the firemen might be on their way.

longonSpam's picture

This is a massive new short by -somebody- if I ever saw one. Anyway thanks Jamie, thanks Lloyd. BoughtTFD Bitchez!!!

Smiddywesson's picture

It takes a lot of effort for them to push down gold and silver on their own, but during a general market sell off, they are pushing PMs in the direction of the current, so the sell off is to be expected.  This will only increase as the markets sell off, delighting us in our new discounted pm purchases and testing our emotional fortitude with respect to our existing cost basis. 

This is a game of chicken, in which the Bernank only prints enough to stall and buy gold, while being pressured by the impending collapse to pull the pin and revaluate gold and then print like crazy.  Sooner or later he has to make his move.  Hang tough everybody, when gold is revalued, it won't matter what your paper gains or losses were back in December, they will be only a small fraction of your gains under the new price.   

longonSpam's picture

Fuckin A. Like anybody is going to care whether they bought at 1600 or 1700 when it's over 10 just to begin, every Eagle counts though.

WhiteNight123129's picture

Well the tea leaves tell us that US dollar is a safe bet. Sell your Gold buy Treasuries!!.... Just kidding.


GeneMarchbanks's picture

'Lastly, absolutely none of this matter one iota when the central banking cartel resumes printing.'

BTFD 'nuff said.

youLilQuantFuker's picture

Amen. Who give a sit about intraday swings or even monthly price variations.

We all know where this bish is headed.

SwimmininNawlins's picture

Maybe I'm just not getting it, but how can gold go down when everything I read points to a global economic collapse?  It doesn't make sense to me.

fonzanoon's picture

Thanks for the link GeneMarch....I live in the U.S. So according to that link if I have money in useless dollars and believe in gold (which I do) I am about to be rewarded with an incredibly strong dollar which would enable me to buy more gold at lower prices...even though the U.S has been the worst offender with the printing press? It baffles me. 

WonderDawg's picture

Deleveraging/liquidating leads to a collapse in all asset classes in a scramble for cash.

SwimmininNawlins's picture

So this means it is a good time to buy, correct?

Harlequin001's picture

Basically yes, if you can handle the short term loss...

WonderDawg's picture

I'm buying a little here and there on the way down. If it gets below $1000 I'll start loading up. That's my strategy, but everyone has their own ideas.

Harlequin001's picture

I'm fully invested in gold and silver and have been for years, swap between the two when I need to, and more so at times like this.

If you're waiting for $1,000 I don't think you'll ever be fully invested, which means that you'll always lose out, its only the scale that matters...'

WonderDawg's picture

Like I said, we all have our own ideas about what's going on, and I put mine out on the table. Fortunately, I do have the ability to change my strategy if circumstances dictate. I try to stay flexible and open-minded.

Harlequin001's picture

'I try to stay flexible and open-minded.' - that is the key, isn't it...

Smiddywesson's picture

So this means it is a good time to buy, correct?

Better than yesterday, but not as good as tomorrow, until there is no tomorrow, and then it's too late to buy.

Sorry, not trying to be cryptic.  There will be better PM prices in the future as conditions worsen, but you can't time when Bernanke decides to revalue gold and then print, so if you wait you might miss the boat.   Everyone should have a core position against the coming collapse/revaluation, both of which can come at any time.  Additional funds should be kept ready for lower prices as the market sells off and drags down PMs.  Sorry, nobody can tell you how low prices will go before Bernanke makes his move, but if they unleash all their margin hikes, you can bet they are using them because they won't need them soon.  In that case, buy everything you can because the revaluation of gold is coming.

Sudden Debt's picture

a collapse of the paper assets. physical PM's now sell with a mayor premium.  

Quintus's picture

Because the price of Gold, and Silver for that matter, is nolonger determined by old-fashioned concepts such as physical 'Supply' and 'Demand'.  Rather it is set based on how many paper contracts (99% of which are cash settled) some guys on Wall St. decide to supply.  Producers and Consumers of the actual metal have almost no say in what the price level is.

It's rather as if the price of Oil was set based on the supply and demand of something else completely, like Beans.  Want to lower the price of Oil?  Just flood the market with beans et voila.  There may be screaming demand for Oil and not enough supply, but the market says beans are being sold in great quantity, therefore Oil goes down.

It's nuts, but that's how the metals markets work these days, and it explains why the big price declines normally happen when Comex paper is open and the London physical market isn't.

scatterbrains's picture

It's just as Tyler said, the fed can't print until 900ish SPY.  A good indication of how gold is not in a bubble is the fact that traders are buying paper i.e. stocks and bonds anticipating the print moment but not doing the same with gold. If gold is bubbly shouldn't they be buying it as well?

If anything this suggests that paper is in a bubble and pm's are discounted/undervalued.


Peter Pan's picture

If you focus on the short run, nothing makes sense. It's only against the backdrop of the long run that true patterns and lasting outcomes emerge. We often see lousy teams beat the best teams, we often see donkies win horse races and we often see red coming up 10 times in a row on a roulette table. Eventually we realise that these are simply statistical possibilities or straight out manipulations. Gold seemingly "died" between 1980 and 2000 but did it really? No, because we now know the truth of what was really perpetrated by a fiat/credit hypnotised society and a manipulative Fed/Banking system.

You can either trust in government to give your fiat dollars continued value, or you can trust in the umpteen thousand replays of history that have seen paper in all its forms bite the dust and gold survive without the assistance of government.

 At the end of the day go with whatever makes you comfortable as long as you are prepared for the loss.

akak's picture

You can either trust in government to give your fiat dollars continued value, or you can trust in the umpteen thousand replays of history that have seen paper in all its forms bite the dust and gold survive without the assistance of government.

Very nice!

It is a historical lesson that the clueless contemporary deflationists, however, cannot ever seem to absorb --- to their eventual and inevitable loss.

Downtoolong's picture

When Gold is roaring  skyward everyone talks and brags about their strategy to BTFD. Then when TFD happens they write dissertations instead, questioning what it means. Get some balls. Just buy it already.