Benchmarking a trend with a moving average (Example: Gold)

They say a bad workman blames his tools.

Quite often, good work means using the right tools.

In a trend you need to use trend-following tools - and the most famous indicator is the moving average.

When it's a fast-moving trend, you need to use averages taken over shorter periods (e.g. 20 day SMA > 200 day SMA). Likewise a slower trend needs averages taken over longer periods (e.g. 20 week > 50 day).

Gold has just bounced off the 20 week moving average for the fourth time. The market is clearly benchmarking this trend according to this specific average.

So while the price is above this moving average the trend is intact - and when it eventually breaks below it will be an important signal that the strength of the trend has weakened - and could be about to reverse.

On the daily chart a rising trendline has broken but we would argue the reason the rebound off the low has been so strong is because the price rebounded off the 20 week moving average.

For now our bias is bullish but there are no good risk:reward opportunities to buy and it remains unclear whether the short term uptrend can continue after the trendline break