Spot gold is inching towards forming a “Death Cross” on its daily chart, which may transform its ongoing downside correction into a full-fledged bear trend.
A death cross occurs when an asset’s short-term moving average falls below its long-term moving average. Many analysts and strategists look at the crossover as a sign of a sell-off wave, leading to a long-term downside move.
Presently, gold’s 50-day moving average (50-DMA) stands at $1,880, while its 200-day moving average is at $$1,801. The precious metal’s latest drop after a flurry of positive COVID-19 vaccine reports indicates that it may cover the $79 gap between its moving averages at least by the next quarter, thus forming a death cross.
In retrospect, the flagship cryptocurrency lags the precious metal but on different timeframes. In 2020, the BTC/USD exchange rate on a weekly timeframe has shown evidence of tailing the XAU/USD exchange rate on monthly charts.
TradingShot, an independent analysis firm, spotted the similarity first, using Fibonacci retracement levels and Relative Strength Indexes.
Bitcoin is showing signs of correction already, having hit its best level to date at $19,873 on November 30 (data from Coinbase). It is now down by up to 7.74 percent, holding $19,000 as its interim support for the next leg up towards $20,000 and beyond.
That fundamentally prompts investors to move their capital from poor yielding debts and cash instruments to riskier safe-havens like stocks, gold, and Bitcoin.
I am as bullish on Bitcoin as anybody but looking back there is a high chance that this will mark the bottom in precious metals,” said Florian Kössler, the head of the strategy at Friedrich & Partner. “From a game theory perspective, I would advise owning Bitcoin, Gold, and Silver.