Gold Prices Get Support At 50-Day Avg, Stocks Weaken

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Gold prices found support at their key 50-day moving average line as the stock market weakened more Monday afterCaterpillar ( CAT ) cut its 2012 outlook for the second time this year. The blue-chip, heavy-equipment maker said the global economy was slowing faster than it had expected.

Spot gold prices added 0.31% to $1,726.80 an ounce. PowerShares DB U.S. Dollar Index Bullish ( UUP ), which tends to move opposite the yellow metal, was flat at 21.81.

SPDR Gold Shares ( GLD ), tracking about a 10th of an ounce of bullion, rose 0.32% to 167.50.

Market Vectors Gold Miners ETF ( GDX ) picked up 1% to 52.33. It also found support at its 50-day moving average.

"Gold (mining) stocks showed resilience during the broad market downage on Friday and it appears that they may be under accumulation," said Janice Dorn, co-founder of Jtrader.us. "If (gold futures) can hold that $1,720 an ounce area, it has a chance to get back to the $1,750 to $1,760 an ounce area."

After touching six-week lows Friday, gold prices found support thanks to bargain hunters and short covering, in which traders aiming to profit from falling prices close their positions by buying.

"The gold bulls have voted and they expect that the U.S. government will not be able to dig itself out of the current hole, relying instead on inflation and devaluation as a poor-man's solution while growth remains soft for the foreseeable future," Waverly Advisors wrote in a client note Monday. "The TIPS (Treasury-inflation-protected securities) auction results last week showed that at least a portion of the U.S. bond markets are of the same mind."

Gold ETFs liquidated about 0.9 tons of their holdings in the past week, according to Walter de Wet, an analyst at Standard Bank. "Investor uncertainty over the ability of QE3 (quantitative easing) to support prices and/or the longevity of Fed's open-ended commitment to easing is weighing on gold," de Wet wrote in a daily commodity report.

He believes gold should find price support at $1,700 an ounce.

Stock Market Overview

SPDR S&P 500 ( SPY ) shed 0.16% to 143.16 and broke below its 50-day line for the first time since July.

"While a close below that level wouldn't be catastrophic, it would indicate a clear deterioration from the upward trending channel that has been in place since the middle of May," Randy Frederick, managing director of active trading and derivatives at Charles Schwab, wrote. "I'm looking for a few more days of weakness, followed by a new uptrend that could be sparked by some positive earnings surprises this week."

He projects the S&P 500 will rebound to a new high of 1,500, or $150 for SPY, by year's end.

With about one in four S&P companies having reported third-quarter earnings, about 60% have beaten earnings estimates, while most have missed on revenue.

Earnings for S&P 500 companies that have reported Q3 results are running flat vs. a year ago.

"The bigger story however, is how many have made pessimistic statements about fourth quarter," Frederick added. "This dour outlook will ultimately translate either into lots of upside surprises, or a very weak Q4 earnings season."

PowerShares QQQ (QQQ) ticked up 0.52% to 66.03.

SPDR Dow Jones Industrial Average (DIA) fell 0.25% to 132.79.

Despite giving out bad news, Caterpillar shares rose 1% to 84.98. But it has been trading below its long-term 200-day moving average since May, which is very bearish. The company halted production at some plants earlier this year and expects to shut down more. CEO Doug Oberhelman said the company doesn't expect the global economy to improve until the second half of 2013.

Follow Trang Ho on Twitter @TrangHoETFs



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: CAT , GDX , GLD , SPY , UUP

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