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Gold futures are set to see a death cross form on the price charts that many technical strategists believe may underscore a bearish trend in the yellow metal.
A death cross occurs when the 50-day moving average, which many chart watchers use as a short-term trend tracker, crosses below the 200-DMA, which is widely viewed as a dividing line between longer-term uptrends and downtrends. The idea is that the cross marks the spot that a shorter-term selloff can be defined as a longer-term downtrend.
Presently, gold’s 50-day moving average stands at $1,857.08 an ounce, while its 200-day moving average is at $1,853.27, FactSet data show (see attached chart).
FactSet
The potential formation of a death cross, which reflects the recent slump in trading, comes as gold has experienced whipsawing action, which on Wednesday culminated in April gold GC00, -2.53% GCJ21, -2.53% inching 0.1% higher, to settle at $1,835.10 an ounce, after the precious metal tumbled 1.6% on Tuesday.
Gold started the new year on a sour note, with prices settling lower in January MarketWatch’s Myra P. Saefong reports, but despite its retreat some dealers remain optimistic.
Indeed, the COVID pandemic saw gold prices hit a recent peak in August at over $2,000 but trade has since softened.
Gold bulls see the Biden administration’s $1.9 billion coronavirus relief package, as possible support for bullion, even if the Democratic leader’s proposal comes in at a fraction of his proposal as he compromises with Republicans. The extra stimulus to economic growth, combined with the Federal Reserve’s loose monetary policy, may spur inflation eventually.
Experts also have pointed to coronavirus vaccine efforts as also spurring the economic rebound and supporting gold’s outlook
Cailin Birch, global economist at The Economist Intelligence Unit was told MarketWatch in a recent interview that bullion prices may drop noticeably in the third quarter to an average $1,775 as gross domestic product rebounds, then to around $1,750 in the fourth quarter of 2021.
Birch told MarketWatch’s Saefong, however, that a long, halting economic recovery will help to buttress prices over the following two years.
The last death cross in gold formed back on June 25, 2018 and a golden cross, when the 50-day rises above the 200-day, occurred on Jan. 22, 2019, according to Dow Jones Market Data.
Gold held fairly steady in its mostly upward trend in 2020 during coronavirus pandemic, before declining erratically since. The 50-day has held above the 200-day for 514 consecutive trading sessions, marking the longest stretch since the 802 trading days from Feb. 11, 2009 to April 17, 2012.
