Gold and reversion to the mean. What does that mean?
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Loosely defined reversion to the mean is defined as prices reverting to an average price.
Gold has gotten way ahead of its upsloping 50-day and 200-day moving averages. At some point, price will meet the moving average. Either price has to decline or the moving average has to move up or both. My thought is that the price of gold may correct somewhat and the moving averages will move higher. Maybe a 50 or 100 dollar drop in gold before they meet? Maybe. Maybe not! Or gold can move higher delaying the reversion to the mean.
Silver has remained above its upsloping 50-day and 200-day moving averages and is a bit above its 50-day moving average and has had its mean reversion. With the upsloping moving averages, I see silver potentially holding support at or near here and then moving higher.
The prognosticators said this week the price of gold declined because of profit taking and a Chinese holiday which reduced the demand from Chinese buyers. My thought is that, as I indicated above, gold has gotten a bit ahead of itself price-wise. Metals are a long -term hold so disregard the noise of the economic indicators which I am highlighting below.
On Wednesday, Gross Domestic Product (GDP) for the first quarter was released and was negative mostly from negative net exports. Two down GDP quarters in a row historically has indicated a recession unless the definition gets changed by the National Bureau of Economic Research (NBER) which is a non-governmental agency as it did for Joe Biden so he would not have a recession a year or two ago. On Friday, the Employment Report by the US Department of Labor was released and had the unemployment rate unchanged at 4.2% while non-farm employment increased by 177,000 which was above the consensus estimate. This was for April.
Ignore the noise. Hold metals for the long-term.
Until next time…
