The definition of a death cross can vary depending on who you ask but generally it refers to the 50-day moving average crossing under the 200-day moving average. A common condition added to this definition is that the 200-day moving average must also be on a downward trend.
Generally this is seen as a bearish sign and is supposed to indicate that the market has a negative outlook on the future of gold prices.
So with gold entering a death cross, you have to ask: how useful is this indicator? While many technicians do use other indicators in combination with the death cross to get a better feel of market direction, it’s still an interesting statistical exercise to look through historical data.
After all, how often do death crosses and their opposite, the golden crosses, occur? What is the typical price performance a week, a month, a quarter and a half year after? Do they actually predict longer term market deterioration?
The first question of death cross frequency is a relatively simple one to answer using historical data. Using gold spot price available from the World Gold Council at Gold.org, an analysis found the commodity metal has seen 37 total 50/200-day moving average crossovers (including last week) since 1979.
That works out to 19 death crosses and 18 golden crosses at roughly 1 crossover per year.
The tables below list each death and golden cross occurrence along with the number of trading days each period and the percent change after one week, one month, three months, six months and until the crossover reverses (by definition, a golden cross always occurs after each death cross and vice versa).
Death cross performance since 1979
|Death cross||Trading days lasted||% change after 1 week||% change after 1 month||% change after 3 months||% change after 6 months||% change ar reversal|
|Feb. 20, 2013||TBD||TBD||TBD||TBD||TBD||TBD|
|Feb. 10, 2012||10||0.7||-0.8*||-6.6*||-5.4*||3.8|
|Sept. 1, 2008||116||-1.7||7.0||-5.4||14.0*||8.9|
|Oct. 19, 2006||43||-0.2||4.7||5.4*||14.2*||2.8|
|May 30, 2005||56||1.8||4.5||3.0*||18.5*||6.0|
|June 4, 2004||85||-0.9||2.6||3.4||16.7*||7.0|
|May 3, 2000||290||0.7||2.8||-0.1||-4.0||-2.1|
|Dec. 14, 1998||221||-0.6||-2.0||-0.6||-10.7||6.9|
|June 12, 1996||642||0.4||-0.3||-0.7||-4.2||-23.0|
|Sept. 27, 1995||66||-0.3||-0.3||0.9||4.3*||0.9|
|Dec. 16, 1994||90||0.3||-0.7||0.9||2.9*||3.4|
|Oct. 2, 1992||155||0.6||-2.4||-5.7||-2.3||2.2|
|Jan. 30, 1992||157||0.0||-1.6||-5.5||0.2||-3.9|
|Feb. 27, 1991||202||1.7||-1.7||-1.2||-1.7||1.3|
|May 1, 1990||104||0.3||-1.6||0.3||2.9*||5.4|
|March 2, 1988||452||1.8||6.5||6.5||0,.0||-4.4|
|Aprl 29, 1983||588||0.5||1.9||-1.7||-11.0||-24.2|
|Jan. 7, 1981||432||-0.6||-10.8||-12.5||-30.8||-20.8|
|Avg. last 10 years||71||-0.3||1.9||-0.8||10.4||5.8|
|Median last 10 years||71||-0.6||3,.6||-0.7||14.1||6.1|
* indicates after reversal
For death crosses, the average length is 212 trading days while the median length is only 135, indicating a few occurrences’ lasted unusually long. Within the last 10 years, the average has only been 71 days, a significantly shorter length.
In fact, none have lasted six months or longer since 2000. If the pattern holds, the current death cross may only last 3 months.