Markets

Is Gold ETF Rally Over? Why This Technical Analyst Thinks It's Not

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Gold prices slid further Wednesday as investors awaited clues on the Federal Reserve's next interest-rate decision later this week. Fed Chair Janet Yellen and other central bankers are set to meet in Jackson Hole, Wyo., this weekend for their annual symposium.

The precious metal came under pressure last week when a slew of hawkish comments from policymakers following bullish jobs data raised the odds of monetary tightening.

SPDR Gold Shares ( GLD ), a commodity ETF, slipped 1.1% on the stock market today , closing below the 50-day moving average as it fell to its lowest level since July 27.

VanEck Vectors Gold Miners ( GDX ), which invests in gold stocks, tumbled 7.1% as it fell solidly under that 50-day key line of technical strength. Top holdings like Barrick Gold ( ABX ) and Newmont Mining ( NEM ) were gouged as much as 10%.

[ticker symb=][ibdchart symbol="GDX" type="daily" size="full" position="leftchart" ]

Gold prices hit a four-week low in early Wednesday trading, pressured by bearish outside markets, wrote Jim Wyckoff, a Kitco senior technical analyst.

"Some sell-stop orders were triggered in the futures market after key near-term technical support levels were breached," Wyckoff said. "Also, the outside markets are in a bearish posture for the precious metals on this day , as crude oil prices are lower, and the U.S. dollar index is higher."

In an email to IBD, Wyckoff noted that while gold prices are in a near-term downtrend, the trend over the past year "suggests the path of least resistance will remain up, until a bearish technical signal occurs." The close below the 50-day Wednesday for GLD and GDX could be interpreted by some investors as bearish.

However, an Oppenheimer analyst believes the long-term turnaround for the precious metal commodity should stay in play.

"Recent weakness is occurring following a strong uptrend rather than coming out of a major topping pattern," Ari Wald, an Oppenheimer senior technical analyst, told IBD in an e-mail. Wald said he would be more concerned if the weakness was preceded by a lengthy period of distribution. He also noted that the U.S. dollar was not breaking higher.

"Due to their inverse correlation, I'd be more concerned that renewed strength in the dollar would derail this year's reversal in commodities priced in dollars. (The U.S. Dollar Index) has instead been more range-bound and is showing signs of continued long-term moderation, which is a positive for the price of gold rather than a negative."

Wald added: "We would view any weakness over the coming weeks as healthy consolidation ahead of gold's next leg higher."

VanEck Vectors Junior Gold Miners ( GDXJ ), investing in small-cap mining stocks, dropped roughly 8% Wednesday and also lost support at the 50-day.

Silver commodity and mining ETFs also carved out losses, including a 1.7% fall for iShares Silver Trust (SLV).

SLV fell below its 50-day Monday and remains stuck below that level. It has given up most of its gains since its late June breakout from a cup-with-handle base.

Global X Silver Miners (SIL) fell 8% and also cut through its 50-day line.

IBD'S TAKE:The gold, silver and gem mining industry group has outpaced 196 peers this year. To find out if your ETF holds the best stocks from this best industry group, check outIBD Stock Checkup .

In other ETF market action, ETFs tracking the major stock indexes closed lower Wednesday. The S&P 500 and Nasdaq continue to trade near all-time intraday highs, but the market uptrend is under pressure.

12 Bellwether ETFs

Here's how major exchange traded funds across major asset classes performed today, with IBD Relative Price Strength Ratings.

The RS Rating is a measure of a stock's price performance over the last 12 months, compared with all other stocks and ETFs, on a scale of 1 to a best-possible 99.

Following daily ETF market action can be key to successful investing:

SPDR S&P 500 (SPY), -0.5%, RS 51

PowerShares QQQ (QQQ), -0.7%, RS 59

SPDR Dow Jones Industrial Average (DIA), -0.4%, RS 51

IShares Core S&P Mid-Cap (IJH), -0.6%, RS 63

IShares Russell 2000 (IWM), -0.8%, RS 65

IShares MSCI EAFE (EFA), -0.2%, RS 34

Vanguard FTSE Emerging Markets (VWO), +0.3%, RS 72

SPDR Gold Shares ( GLD ), -1.1%, RS 70

United States Oil (USO), -2.4%, RS 21

IShares Core U.S. Aggregate Bond (AGG), 0%, RS 34

PowerShares DB U.S.$ Bullish (UUP), +0.3%, RS 21

IPath S&P 500 VIX Short-Term Futures (VXX), +2.1%, RS 1

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


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

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