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

by on April 25, 2012 | ETFs Mentioned:

Stocks bounced all over the place yesterday as dismal housing data kept a lid on optimism. Major equity indexes managed to hold onto modest gains as the closing bell rang, except for the Nasdaq; shares of Apple shed another 2% on the day as pre-earnings jitters dragged down the entire tech sector [see also High-Tech ETFdb Portfolio]. Gold prices inched higher from Monday’s close, although selling pressures pushed futures prices lower during Wall Street hours, settling around $1,640 an ounce.

The precious yellow metal could see volatile trading later today as investors digest commentary from the latest FOMC announcement. As such, our ETF to watch for the day is the popular SPDR Gold Trust (GLD), which may see an increase in trading volumes depending on which way Bernanke’s words tip the market [see Free Report: Everything You Need To Know About Commodity ETFs].

Chart Analysis

GLD has been slumping along the $160 level for the past 2 months, ever since failing to summit the $175 level since 2/2/2012. Since then, GLD has come underneath its 200-day moving average (yellow line), which is not terribly worrisome considering its impressive run-up in 2011 when it peaked at $185.85 a share. In fact, the recent decline may be interpreted as a healthy correction, assuming that price do not retest support at the $150 level [see GLD-Free Gold Bug ETFdb Portfolio].

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Conservative investors may wish to hold off until GLD is back above its 200-day moving average, thus confirming it has resumed its longer-term uptrend [see also Free Report: How To Pick The Right ETF Every Time].

Outlook

Commentary from the FOMC and Chairman Bernanke are known to ignite rallies, as well as sell-offs, across virtually every asset class. If gold takes on safe haven demand throughout the day, GLD could spike as high as $165 a share, although more conservative traders may wish to lock-in profits around $162.50 a share. However, if selling pressures take hold after the Fed Chairman speaks, GLD could retest support at the $155 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: Long GLD January Call.