Stocktake

GOLD RUSH: Gold has been hammered in December, falling below its 200-day moving average for the first time since January 2009. The gold run of 732 consecutive closes above its long-term average was its longest ever, causing many to question if its decade-long secular bull market is over. This may be the case but there is little technical evidence for such a statement.

Gold has fallen below its 200-day average on many occasions since 1999 and suffered nine double-digit percentage declines during that period, including a 29 per cent fall in 2008. Today, it remains more than 80 per cent above its 2009 low and 2011 remains on course for a double-digit percentage gain.

The parabolic spike above $1,900 in August smacked of panic buying, and it’s little surprise that a correction ensued.

Gold bugs will be hoping that its 300-day average (around $1,530) holds. It did so on 10 occasions between 2001 and 2007, and appears to offer firm technical support.

Still, the recent falls should act as a wake-up call for over-zealous supporters of the metal. Market strategist and blogger Cullen Roche is a gold enthusiast, but he notes that gold “serves like an insurance policy in a portfolio and should never be the portfolio”.

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CALLING SANTA: Markets are historically strong in December, although the much-cited “Santa Claus rally” actually refers to the last five days of the year plus the first days of the next.

Market historian Jeff Hirsch, author of the annual Stock Trader's Almanac, notes gains have averaged around 1.5 per cent during those seven days over the last 60 years. Common explanations include investment of year-end bonuses and a Christmas feel-good factor.

If Santa doesn’t come? An ugly Christmas often heralds a bear market, says Hirsch – hence the expression, “If Santa Claus should fail to call, bears may come to Broad and Wall.”

Coincidence? Data mining? Perhaps. However the worst end-of-year performances in recent times came in 1999 and 2007, both of which presaged terrible bear markets.

Superstitious investors will be hoping Santa delivers the goods.

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NEED A DOLLAR/EURO: Everyone, it seems, is fretting about the falling euro – even hard rockers. Metallica and Red Hot Chili Peppers have brought forward plans for European tours in case further declines render promoters unable to pay bands’ fees.

It wasn’t always thus. In late 2007, rapper Jay-Z was seen counting €500 notes in a video and supermodel Gisele Bundchen was insisting on being paid in euro. Valued at $1.45 at the time, the euro hit $1.60 within months before collapsing to $1.25 in 2008.

One for contrarians to consider.