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

by on December 20, 2012 | ETFs Mentioned:

Profit-taking pressures swept across Wall Street as savvy traders were quick to lock in gains following an impressive start to the week. Budget negotiations in Washington D.C. remain at a standstill, leading many to believe that recent optimism could soon turn sour when reality hits and automatic tax increases take a bite out of bottom line returns. Sluggish housing market data received little attention amid looming “fiscal cliff” woes; November’s housing starts figure came in at 861,000, failing to beat last month’s reading of 888,000 [see 101 High Yielding ETFs For Every Dividend Investor].

All eyes will remain fixated on the homefront tomorrow as investors digest the latest U.S. GDP reading. As such, the State Street SPDR Gold Trust (GLD, A-) may be in for a wild trading session if economic growth greatly deviates from expectations. Analysts are estimating that the U.S. economy will post growth of 2.9% this time around, marking a modest improvement from the previous reading of 2.7% [see GLD-Free Gold Bug ETFdb Portfolio].

Chart Analysis

This year has shaped out to be quite the frustrating roller coaster ride for gold investors; after starting off 2012 with a massive rally to $175 a share, GLD spent the next five months tanking and dragging along sideways. This ETF resumed its uptrend in August; however, its historical price pattern held up and GLD failed to summit $175 a share again. To top it off, the metal’s “safe haven” reputation hasn’t been really reliable judging by its poor performance since “fiscal cliff” woes started plaguing the market post-election [Download How To Pick The Right ETF Every Time].

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Since its most recent peak at $174.07 a share on October 4, 2012, this ETF has posted a series of lower-highs (red line) and lower-lows; this leads us to believe that further downside is a major possibility unless a fundamental catalyst can re-ignite the fire behind gold’s longer-term uptrend [see The 5 Most Important Chart Patterns For ETF Traders].

Outlook

If the latest GDP report offers a positive outlook, then safe haven assets like gold may face headwinds on the day; in terms of downside, GLD has major support around the $160 level, which is dangerously close. On the flip side, a disappointing GDP report can serve as a reminder that the domestic recovery will be slow and steady at best; in terms of upside, this ETF may face profit-taking pressures as it nears $167 a share followed by the $170 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.