SAMT Blog
Is Gold's trend still your friend?
16. May 2021, by Ron William
Technical Analysis
Investment wisdom teaches us “the trend is your friend”. It’s especially true of Gold’s parabolic 20-year rise to the all-time high of $2080, in August last year. Since then, the market remains in a corrective phase, and is currently testing an important line in the sand at $1850, serving as the long-term 200-day average.
This benchmark indicator represents the average yearly performance and is keenly watched by investment professionals. In fact, successful hedge fund manager, Paul Tudor Jones, famously cites the “200-day rule” as one of his key market timing strategies. Risk-adjusted investments are only considered attractive with markets that outperform their rising 200-day trend average. Otherwise, in his field-tested experience “You play defence, and you get out!”
Figure 1A highlights the indicator’s useful guidance of keeping gold-bugs invested during the 2019-2020 uptrend. It proved critical during the pandemic-led crash which temporarily breached the 200-day trend support. YTD the indicator remains flat, marking a transition period that will likely offer whipsaw and false signals. Moreover, a confluence of price resistance is nearby, i...
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