Chart of the Day - Monday, July 27th, 2020

Today’s Chart of the Day was shared on Twitter by Ed Bradford (@Fullcarry). Well, it finally happened. Gold hit an all-time high today for the first time in nearly nine years. The yellow metal bottomed out in 2015 not long after Wall Street Journal columnist Jason Zweig famously called Gold a 'pet rock.' Ironically, this unsexy 'pet rock' has essentially become a momentum trade at this point, as it has outperformed the S&P 500 across multiple time frames. As of today, Gold has booked both a 7-day and 7-week winning streak. So, is Gold too far extended in the near-term? Or, do we buy the long-term breakout? Ed's chart shows Gold in relation to its 200-day moving average over the past 20-years. It's currently about 17.5% above it's 200-day moving average. While 17.5% is relatively extended, it's not quite a historical extreme. As Ed points out, 25-30% would be an extreme reading. The current winning streak can't last forever, but history shows us that price could continue to stretch higher before mean reversion begins to work its magic.