Gold and silver continue to crash. This is because the U.S. Dollar is going up on emerging market weakness.
Gold is now more than -7% below its 200 daily moving average. Does this mean that you should go long gold and silver right now, with precious metals approaching major supports?
Keep in mind that hedge funds are extremely bearish on gold right now.
Here’s what happens next to gold when it falls -7% below its 200 daily moving average for the first time in 6 months.
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As you can see, it is not a great idea to be long gold right now. Forward returns are 50-50. Gold might bounce, but it also might become even more oversold.
Gold’s major bottoms occur when it is -20% below its 200 daily moving average.
More importantly, all of these historical cases occurred when gold was in a bear market. None of them occurred in the 1970s and 2000-2011 bull markets. In other words, gold’s current crash is a sign that gold is not going to be in a bull market any time soon. Gold bugs will be disappointed.
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