It has been more than two months since my last update on gold charts, meaning we’re well overdue.
Let’s see where we stand.
Since my Aug. 5 look at gold, the yellow precious metal is marginally lower, but not before it rallied 9% in three weeks. To be precise, at the time I saw the SPDR Gold Shares (GLD) rallying toward $135 and the pop went as high as $137.50, marginally exceeding my expectations. My analysis stood to be correct — that’s not to brag, but to point out that sometimes, straightforward analysis on gold can work as well as more complex analysis.
In the August article, I showed the longer-term chart of GLD, which matched the June lows with its 61.8% Fibonacci retracement of the rally from 2009 up to the 2011 highs. I continue to see gold in a longer-term bottoming phase, which as I also stated in August, could well mean a retest or even undercutting of the June lows.
Another way of looking at the longer-term charts of GLD is by drawing a trendline off the 2005 lows on a logarithmic chart. On that chart, we see how the bounce off the June lows merely bumped into the underbelly of this uptrend, then pushed the GLD lower again.
Through this lens, it’s simply not a great time to buy GLD quite yet.
The shorter-term daily chart of GLD shows the late August price rejection coinciding with a resistance area from early June. Immediate-term support is near $123-$124, and a drop below $123 could quickly bring GLD back toward the June lows near $115, or lower.
As a gauge of near-term price strength, I am using the 21-day simple moving average, which tends to prove quite useful.
Very simply, if GLD trades above this moving average, it favors the long side — if GLD trades below the moving average, then it favors the short side.
All in all, in the big picture, gold needs to consolidate better still before gold bulls again see their days.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.