After it attained multi year highs and ended last fiscal year
in the green for the 12
straight year, the yellow metal seems to be struggling so far in
SPDR Gold ETF (
which tracks the spot prices of gold, is down about 4.13% so far
In fact looking at the price pattern for the Gold ETF, it can
be said that it has been facing technical weakness for quite some
time now. After getting a sold boost post QE3 announcement by the
Federal Reserve, the ETF made its 52 week high, but failed to
sustain those levels.
The ETF had
earlier formed bearish patterns
during the latter part of last year and has continued the weak
momentum forward, into this year. GLD has very recently broken
through a very strong support level of $160. Subsequently, the
support breakout was also characterized by another bearish
triangle breakout as shown in the chart.
Since the start of 2013, the price movement of GLD had been
exhibiting rangebound activity. However, what seemed like some
sort of consolidation around the $160 support mark was scrapped
by the bearish breakout.
It is also worthwhile mentioning that in the few trading
session following the breakout, the bearish bias has been very
strong as it is indicated by the high volumes. These volumes, ―
shown in the encircled portion in the volumes chart, were higher
than the 50 DMA volume line (read
Two Unconventional Sources of ETF Yield
Also, the more responsive 50 DMA line (blue) is on the verge
of a death crossing with the 200 DMA line (green). If it does
this, it will surely be bad news for GLD investors. As we can see
the 50 DMA line has already intersected the red 100 DMA line
earlier. Accordingly, the ETF is trading well below its key trend
lines of 50, 100 and 200 DMA.
Having said this, it is prudent to note that after the vicious
sell off recently, the ETF has entered deep into the oversold
territory. The RSI with a reading of 25.53 and the Williams R
indicator with a value of -90.92 signify the oversold position
Palladium and Platinum ETFs to Soar?
In this regard it is imminent that the ETF will probably
witness some sort of a rangebound activity or even a spike, in
the subsequent few trading sessions, just in order to heat up
this highly oversold counter.
Having said this, it is prudent to note, that the risk-on
environment has well and truly swept the market, with the equity
markets making new highs. Therefore, the safe haven nature of the
yellow metal has failed to make it a good candidate for
investors. Not to forget that the inflation levels are still very
low irrespective of the Fed's easing. Therefore the hedge against
inflation also does not seem to be working for gold.
Therefore, at least in the short term the outlook for the Gold
ETF GLD seems to be headed in the wrong direction. However, with
the equity markets due for a
correction (if not downturn), the safe haven is bound to return
for the yellow metal (see
Do Large Cap ETFs Signal Trouble Ahead?
Furthermore the Federal Reserve seems determined enough to
continue their monetary easing till the inflation and
unemployment threshold levels are met − which by the way, are
quite far from current levels. These are most probably going to
be the driving factors for the ETF especially in the longer
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SPDR-GOLD TRUST (GLD): ETF Research Reports
ISHARS-GOLD TR (IAU): ETF Research Reports
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