Only hindsight will tell us if gold bottomed last week, but one reliable yet little-watched indicator is encouraging.

February 22, 2021

Dear Fellow Investor,

I’m not a dedicated technical analyst, but I hit upon one simple indicator years ago that served me very well in the 2000s bull market.

It was the one support level that seemed to always signal a major bottom if gold bounced off of it…and a bear market if the price fell through it.

So here’s the punchline: Gold bounced off of this key support last week.

So what’s this “secret” support line? The rarely-considered 300-day moving average.

While most technical analysts religiously follow the 200- and 50-day moving averages. long-time Gold Newsletter readers will remember how often I referred to the 300-day moving average during the 2000-2011 bull run, and how well it worked for us.

As you can see from the chart below, gold often bounced off of its 300-day moving average back then while testing its long-term uptrend. A break of the 300 DMA, and especially of the 400 DMA, typically signaled a more-extensive correction or even the advent of a bear market.

Again, as you can see as we zoom in with a five-year chart below, gold tested that 300 DMA last week.

And, with a gain of about $25 today for gold (and an impressive surge of about 60¢ in silver), the metal has bounced decisively off of that support line.

From a fundamental point of view, it’s also positive that the expiration of China’s Golden Week holiday also coincided with that bounce off of the 300-day moving average.

It’s encouraging too that the gold stocks are leveraging gold’s rise today…and that this rally is coming in the face of very encouraging news on the pandemic front.

Again, only hindsight will tell us if the gold bull market is finally back on track. But so far, so good.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference