Friday’s ETF Chart To Watch: SPDR Gold Trust (GLD)

by on July 15, 2011 | ETFs Mentioned:

Stocks got off to a roaring start but quickly lost steam throughout the trading day as investors pulled out of equities after Chairman Bernanke dispelled any hopes for a new round of stimulus during his second day of testimony. Crude oil futures lost over 2% and prices sank to just under $96 a barrel while gold continues to impress as the precious metal charged to new all-time highs, with futures prices hitting $1,594 an ounce. Silver joined the rally as well and September futures prices for the shiny metal rose to $39.39 an ounce, but sold off a bit coming into the close. Shares of Google spiked upwards of 10% in after-hours trading after the internet giant reported stellar earnings results and blew past analyst expectations.

The SPDR Gold Trust (GLD), which is one of the most popular ETFs designed to track the spot price of gold bullion, rose to an all-time high of $155.24 a share on Thursday morning. Most importantly, this fund doesn’t appear to be losing one bit of steam, so long as financial worries remain elevated both at home and abroad [see Ultimate Guide To Gold Investing]. GLD has been climbing higher every single trading session since the 4th of July weekend and this robust performance has easily put this ETF on our radar screen for today.

Chart Analysis

No matter what your investment horizon may be, the price of gold has been rising consistently over the long run, and likewise GLD has been in an uptrend since inception. Consider the 1-year daily chart of GLD below. Like many ETFs, this fund has the tendency to bounce off its 200-day moving average (yellow line), and the last time it came close to it was back in February 2011 [see GLD Technicals]. Lets consider GLD’s last uptrend as starting somewhere in August in 2010 (above $113 a share) and ending around January 2011 (below $140 a share).



Click to Enlarge

After bouncing off its 200-day moving average in February 2011, GLD has been climbing higher and it has endured no significant corrections. The most serious decline was when it hit resistance at the $150 level in May and then again in June. Over the last few trading sessions, however, GLD was able to break the $150 resistance and charge higher, topping out at just above $155 a share [see GLD Fundamentals]. Persistent fear and uncertainty in the equity markets will easily force more inflows into traditional safe havens, further paving the way higher for GLD.


Consider any trading security and one of three things may happen in terms of price movement: nothing, up, or down. Given that GLD has seen more than a handful of “up” days over the last two weeks, it’s only instinctual to prepare for even a brief correction. However, the markets sometimes do the opposite of what you plan so we may actually see GLD establish support above $155 a share before the trading weeks comes to an end. However, if common sense serves us right, then this fund can quickly and easily retrace down to $152-$150 a share. While if a more serious correction develops and the ongoing medium-term uptrend reverses, GLD will then likely sink near its 200-day moving average (around $140 a share) as it has in the past. We anticipate the possibility of a complex sideways correction in GLD next week, while from a long-term investment perspective we remain bullish on gold [see GLD Fact Sheet].

As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

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Disclosure: No positions at time of writing.