The price of
fell to the lowest level in months this morning before a sudden
reversal higher as stocks began to move lower.
The SPDR Gold ETF (NYSE:
) has fallen seven percent in the last six weeks and the gold
mining stocks have suffered an even bigger loss.
The question arising Thursday is whether the early morning
reversal is a sign of things to come for gold or is it simply
overdue buying after four consecutive down sessions?
The chart of GLD shows a long-term downtrend that began in
2011 and has shaved off one-third of the value of the ETF.
That being said, in 2014 the ETF has been a winner even after
the recent sell-off. The ETF is up seven percent for the
Investors will be split on the answer with the gold bugs
looking at every pullback as a buying opportunity. The problem
with that strategy is that they would have been buying for the
last three years as the price continued to decline.
Gold or DJIA - Which Would You Rather?
The more skeptical investors will look at the chart and see a
long-term downtrend and a choppy pattern over the last few months
after a rally to begin the year.
The gold bears will also question the merits behind owning
gold during a bull market for the equity markets. With the Dow
and S&P 500 trading near all-time highs, what is the reason
to hold gold in a portfolio considering its performance the last
The metal has not been a "safety" net as it has in the past.
Consider the several geopolitical issues and U.S. government
debacles over the last few years and gold was not an asset class
the investors ran to in times of uncertainty.
Even though it appears gold has lost its luster, the odds are
good that GLD will rally for a couple days based on the charts.
The ETF is holding support at $123.11, from its prior pullback
and it is oversold.
That being said, the odds of a sustainable rally are not high
unless the U.S. equity market suddenly begins to crash, which
does not look likely at this time.
© 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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