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

by on January 27, 2012 | ETFs Mentioned:

Stocks oscillated between positive and negative territory on Thursday as investors reacted to mixed economic data. Despite the early morning rally, investors gave into selling pressures following a number of disappoint earnings reports; AT&T and SanDisk both missed analyst expectations, tipping the tech sector lower for the day. Bearish sentiment was rekindled after the latest new home sales report came in worse-than-expected; analysts had predicted 325,000 new sales for the month of December, however, the figure came in at 307,000, which was also below the previous reading of 314,000. Gold continued its winning streak and futures prices for the precious yellow metal settled near $1,720 an ounce for the day.

Investors will pay close attention to the latest U.S. GDP report later today, which makes the State Street SPDR Gold Trust (GLD) our ETF to watch for the day. Gold prices could experience volatility as investors react to the latest economic growth figures; analysts are expecting for GDP growth to come in at 3%, which is a modest increase from the previous reading of 1.8% [see also Five Compelling Long Term Trends].

Chart Analysis

Gold prices have stabilized considerably since falling off their peak at $1,923 an ounce on 9/6/2011. In fact, the price of gold came very close to successfully holding support at the $1,600 level, however, selling pressures dragged it down all the way to $1,523 an ounce on 12/29/2011. Gold prices are off to a hot start in 2012 and GLD is up 10% year-to-date alone [see GLD Returns]. Although GLD dipped briefly below its 200-day moving average (yellow line) in the final weeks of 2011, this ETF has been able to inch above its long term benchmark.

Click to Enlarge

Investors should note that GLD bounced off its 200-day moving average on relatively high volume on 1/25/2012, perhaps suggesting that larger institutional buyers were stepping in at the attractively low levels [see also Are Gold ETFs The Best Defense Against Euro Drama?]. This ETF extended gains as above average trading volumes continued and bolstered prices higher the following day.


If U.S. GDP misses expectations, investors may feel pressured to jump ship from equities and flock to safer asset classes, such as Treasuries and gold. Assuming disappointment strikes, GLD could take on safe haven appeal and appreciate amidst the uncertain economic backdrop [see Special Report: Gold ETFs In Focus]. In terms of upside, this ETF may climb to $170 a share, although traders should note that this is an area of significant resistance. On the other hand, a surprisingly strong GDP report could translate into equity market euphoria and potential headwinds for gold prices. In terms of downside, this ETF may retrace to $165 a share, although major support lies at the $160 level. 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.