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

by on September 13, 2012 | ETFs Mentioned:

This week’s theme of “stimulus hopes” persisted for yet another session on Wall Street yesterday. Major equity benchmarks inched higher into green territory as the bulls piled into equities ahead of the key FOMC conference taking place later today. Investors’ confidence improved following yesterday’s German court ruling which gave the green light for the proposed European Stability Mechanism; likewise, this development has put even more pressure on Bernanke to make a concrete QE announcement [see also Sell Gold Before Bernanke's Address].

The much-anticipated FOMC rate decision is taking place later today, and as such, our ETF to watch is the State Street SPDR Gold Trust (GLD, A). Gold prices have a tendency to trade all over the place whenever Chairman Bernanke speaks, and this press conference should offer plenty of fundamental catalysts for the precious yellow metal to move [see also GLD-Free Gold Bug ETFdb Portfolio].

Chart Analysis

Gold has been evading the headlines and creeping higher over the past two months as positive developments in the eurozone have helped to ease looming worries. Since its most recent bottom at $150.15 a share on June 28, 2012, GLD has gained nearly 10%; the precious yellow metal has been making higher-highs and higher-lows as the bulls have undoubtedly returned to this corner of the commodities market. From a technical perspective, this ETF still has plenty of upside despite its already impressive run-up, however, investors will have to wait and see whether today’s FOMC decision and commentary impact the longer-term underlying fundamentals for the shiny metal [see also 3 ETF Trading Tips You Are Missing].

Click To Enlarge

Although GLD has been able to pierce through its 200-day moving average (yellow line) without a hitch, this ETF can still fall victim to rampant profit-taking seeing as how it has significantly deviated from its previous blue trend line [see also ETF Technical Trading FAQ].

Outlook

This FOMC decision will keep traders on their toes as markets have priced in another round of quantitative easing. If Bernanke delivers more stimulus as expected, gold could spend the day in green territory; in terms of upside, the next resistance level for GLD comes in at $170 a share. If the Chairman’s commentary ignites an equity market sell-off, however, gold could tank big time; in terms of downside, the next support level for GLD comes in at around $165 a share. 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.