SPDR Gold Trust ETF (GLD) — This exchange-traded fund seeks to replicate the price performance of gold bullion, minus expenses. It is one of the few pure plays in gold, in that it actually holds the physical metal. However, as a commodity ETF, GLD could be affected by fluctuations in currency, interest rates and geopolitical crises.
Commodity ETFs are by their nature subject to greater volatility than traditional ETFs, which may be a benefit or detriment to performance. Thus, despite GLD’s correlation to the price of gold, its aggressive investment techniques may not be suitable for all investors. That being said, Morningstar gives the fund its highest rating of five stars, in part due to its positive correlation to the price of gold and its relatively low management fee of 0.4%.
On Nov. 24, in response to several readers’ requests for me to comment on gold, I covered the chart of GLD in the Daily Market Outlook. I concluded that until we saw a close above the inflection point at $116.07, I remained bearish.
That inflection point was penetrated on Tuesday, and Wednesday’s pullback of just 0.2% in an otherwise very tough market for other commodities did nothing to lessen my opinion of the bullish reversal.
GLD had a double break above resistance. Before breaking above $116.07, it closed above $114, closing an open gap. The higher-than-average volume is mostly buying, and its MACD indicator issued a buy signal.
Buy GLD for a short-term trade to its 200-day moving average at $122.
