Apple Inc. (NASDAQ: AAPL) may have been the greatest stock to participate in from 2003 to 20012. Rising from the equivalent of under $10 to $700. The shiny yellow metal of gold may not have returns like that, but gold prices effectively quadrupled during that time. Now gold investors have to worry about the exact same thing that Apple recently had to worry about: the so-called “death cross” chart pattern where the 50-day moving average dips under the 200-day moving average as the near-term weakness gets confirmed along with the long-term weakness.
There is a serious thing to consider here. One caveat does exist here. Gold is being used to keep central bank “real assets” higher while they print money. You will never see a central bank reserve report tabulating real assets in Macs, iPhones, iPads, and iTunes credits. Those central banks will tally up gold as reserve assets and a recent report showed that those central banks bought the most gold in 2012 since 1964.
It was not that long ago that Apple’s stock broke the 200-day moving average and then had that “death cross” where the 50-day moving average broke under the 200-day moving average. Can Apple stumble further? sure, but this is not about Apple. It is not even cause-and-effect because the reason is different. What is not different is the chart pattern.
Spot gold is down to $1,604.90 so far on Wednesday, while the SPDR Gold Shares (NYSEMKT: GLD) trust is down 1.5% at $152.90. If you look at the gold spot chart, the 50-day moving average is up at $1669.70 and the 200-day moving average is just under that at $1664.34.
If you look back to 2012, the “death cross” was seen in gold and the losses that came thereafter were in the high single-digit percentages. Then take a look at the Apple chart below from Stockcharts.com. When its “death cross” broke, Apple shares fell about 20%. Again, Apple’s products are far from being considered central banks reserve assets.
The good news for gold is that even if big losses do continue, support is likely to be found down around the $1,550 level. At the current levels, the so-called “death cross” in gold will be here in a day or two.
Jon C. Ogg