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

by on September 20, 2012 | ETFs Mentioned:

Stocks put an end to this week’s losing streak as better-than-expected economic data on the homefront welcomed back the bulls, at least for the time being. Investors rejoiced after existing home sales topped expectations, with the figure coming in at 4.82 million versus the expected 4.60 million in August. In light of recent central bank stimulus efforts at home and in Europe, the Bank of Japan announced it is beefing up its asset-purchase program to a whopping $1.01 trillion, helping to restore confidence in the fragile global recovery while also raising inflation concerns [see also How To Play $10,000 Gold].

Investors will refocus their attention back towards home later today as a number of economic reports hit the street. As such, our ETF to watch for the day is the State Street SPDR Gold Trust (GLD, A), which could experience volatile trading as investors react to the latest weekly jobless claims data. Analysts are expecting for 375,000 people to have filed for unemployment, marking a modest improvement in the domestic labor market from the previous reading of 382,000 [see also GLD-Free Gold Bug ETFdb Portfolio].

Chart Analysis

Gold is back on the radar screen for many after futures prices staged a stellar run-up in August as intensifying eurozone debt drama paved the way higher for the safe haven metal. The announcement of QE3 at home only added fuel to the metal’s rally as investors continue to grow more and more worried of the consequences that could follow the extensive stimulus efforts on both sides of the Atlantic ocean. From a technical perspective, GLD is nearing a historical resistance level, which could offer a lucrative short opportunity for seasoned investors. Notice how since October of 2011, GLD has been oscillating between the $155 (red line) and $175 (blue line) levels [see also 17 ETFs For Day Traders].

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As such, investors looking to jump in at current levels should exercise prudent risk-management seeing as GLD has failed to summit the $175 level on two occasions since topping out at $185 a share on September 6, 2011 [see also ETF Tools Every Investor Needs].

Outlook

If weekly jobless claims disappoint investors, gold could take on safe haven appeal and continue its march higher; in terms of upside, this ETF has major resistance around $175 a share. On the flip side, an optimistic reaction to the latest labor market report could inspire a “risk on” trade and pave the way lower for gold; in terms of downside, this ETF has support at $170 a share followed by the $168 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.