Gold has been on a remarkable run, capturing attention as investors flock to this often-under-allocated asset amid the U.S.’s evolving political and fiscal landscape. But for those new to the gold rush, the burning question is: Is it too late to jump in?
Historically, the answer depends on your investment horizon. Since 1980, gold has surpassed its 200-day moving average—a key indicator of long-term trends—by 25% or more only seven times. Yesterday marked the seventh. When gold stretches this far above its 200-day moving average, it’s often a sign of being overbought.
Data from the prior six instances shows that initiating a long position at these levels carries poor risk-reward dynamics. Across timeframes up to a year, gold typically trades lower than the day it crossed the 25% threshold. However, long-term investors can take heart: in half of these cases, gold consolidated after its sharp climb and resumed its upward trajectory within a couple of years.
The takeaway? Chasing gold at these levels may not be prudent. Patience could reward you with a better entry point.
