Since my October update on gold, the SPDR Gold Shares (GLD) ETF is lower by roughly 3% and still looking shaky. To get the gold trade right — at the current juncture in particular — we have to understand and closely measure the crosswinds coming from the central bank policies, coupled with the swings and relative levels in other asset, particularly interest rates and the dollar.
Buying gold in preparation for an end-of-world scenario for most investors stopped working in September 2011, when the shiny metal topped. While there can always be made a case for holding parts of a portfolio in gold (be it physical bars or GLD), for yours truly — a portfolio manager mandated to deliver absolute returns — gold at times serves as a directional trading vehicle and more often as a read on the state of investor psychology.
Right now, given the price action in GLD as well as the tone of investor voices, emotions in gold still are too high to buy the metal with conviction. At least on a swing-trading basis.
On the weekly logarithmic chart of GLD, note that the rejection of the retest of the longer-term broken uptrend line in August remains the best case for the bears, from a technical perspective. As such, first support for GLD remains at the late June lows around $115, followed by support closer to the $100 mark.
On the daily chart, things still don’t look too enticing from the long side, although thus far the GLD is holding a higher low vs. its late-June lows. From a momentum perspective, we can’t read too much into the current state either, which leaves me mostly on the sidelines as it relates to GLD and watching for any change in posturing from the Fed.
The most recent example of how GLD just doesn’t yet seem ready to move higher with better conviction came Wednesday, when it rallied nicely above immediate-term resistance, only to give it all back up this morning.
Until buying pressure increases, don’t bother looking at GLD from the long side.
Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.