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

by on June 7, 2012 | ETFs Mentioned:

Equity markets finished in green territory yesterday as stimulus hopes bolstered confidence, despite worse-than-expected economic data reports on the home front and looming threats from Europe. The first quarter U.S. productivity figure came in at negative 0.9%, falling short of the estimate as well as the previous reading of negative 0.5%. Nonetheless, bullish forces were dominant throughout the day as investors cheered on the latest Beige Book report; the Fed commented that domestic factory output and the real estate market had moderately improved [see also How To Play A Treasury Bubble With ETFs].

Investors at home will keep their eyes and ears open for any mention of “stimulus” in the coming weeks as “Operation Twist” nears an end later this month. Ben Bernanke is expected to testify before Congress later today, and as such, our ETF to watch for the day is the State Street SPDR Gold Trust (GLD); the precious yellow metal may experience volatile trading as investors digest and react to economic commentary from the Fed Chairman [see also Warning: Ignore Bill Gross' Hard Money Prediction At Your Own Risk].

Chart Analysis

GLD has endured a bumpy ride thus far in 2012; gold prices kicked off the year with a bang only to fall victim to profit taking pressures over the last three months. Nonetheless, GLD appears to have stabilized at current levels and many are anticipating for the hard asset to resume its longer-term uptrend over the coming weeks, as economic uncertainties from Europe continue to plague equity markets. Notice how GLD held above $150 a share towards the end of May, which is significant seeing as how this support level was also relevant back on 12/29/2011 [see also 3 ETF Trading Tips You Are Missing].

Click To Enlarge

If history repeats itself from a technical perspective, GLD appears poised to continue higher in the coming weeks until it nears potential resistance between $165 and $175 a share. Keep in mind however that the potential announcement of additional quantitative easing from the Fed later this month will likely have a significant impact on gold’s fundamental price drivers [see GLD-Free Gold Bug ETFdb Portfolio].

Outlook

If Ben Bernanke’s commentary on the health of the U.S. economy is more optimistic than investors are expecting, equity markets may have the wind at their back. As such, improved economic growth expectations may create headwinds for the yellow safe haven. In terms of downside, the first level of support for GLD is at $155 a share followed by major support at the $150 level. On the other hand, if investors are spooked by the Fed Chairman’s testimony, GLD could soar past $160 a share, although caution should be exercised as it nears $165 a share seeing as how this is a historical resistance 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.