Just two days ago we published a post pointing out that the decline in gold prices had caused the biggest gold ETF, the SPDR Gold Shares ETF (GLD) to fall below its 100-week moving average for only the 2nd time since 2004. But after seeing the “death cross” chart pattern (when the 50-day moving average crosses below the 200-day), the financial web exploded with pessimism for gold. Now we’re hearing about how hedge funds are fleeing GLD (Business Insider), the FOMC minutes are scaring gold bugs (Futures Magazine), and even the Economist is taking shots:
The current problem for gold is the same factor that helped fuel 12 straight years of price gains; there is no obvious way of valuing it. It has no yield or earnings. So gold bulls might be right to worry about inflation in the long run. But perhaps all those fears (and more) are already reflected in the gold price.
But with all the time and digital ink spent kicking gold in the last few days, gold futures are actually back up a bit this morning:
Chart courtesy Finviz.com. Disclaimer: past performance is not necessarily indicative of future results.
Did we just witness peak bearishness? Are we on the cusp of a mean reversion, or watching a dead cat bounce before the pessimists are vindicated by a further decline? Trend followers would enjoy a continued fall, so we’ll be cheering on the decline camp… and for the time being, it looks like that camp will be very crowded.