200-Day Hints at Gold Breakout

Tuesday, August 18, 2009

Using moving averages for indications of trend and the velocity of trend is very effective. Typically, we do not see much use for them as buy and sell signals but do see them as very helpful in timing trades. A standard moving average can help traders know when to sit patiently and when to begin looking aggressively for entries.

The early 2006 run in gold saw a steep 200-day moving average and then a moderation of trend as gold based for roughly a year. The uptrend recommenced in the end of 2007 and stalled again through 2008.

Now, we once again see the 200-day moving average turning up and gold basing within 10% of its all-time highs. One is hard-pressed to find any other asset class trading so near to all-time highs showing the unique strength of this asset. We still believe a great breakout trade is just around the corner.


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