Equity markets enjoyed another trading session in green territory as optimism surrounding the ongoing “fiscal cliff” deliberations bolstered indexes higher. Good news from overseas also helped to reignite buying interest on Wall Street; European markets cheered on the latest German investor confidence index, which came in better than expected on hopes that the European powerhouse would be able to evade sluggish growth over the coming year [see 101 High Yielding ETFs For Every Dividend Investor].
With the FOMC statement due out later day along with a press conference from Chairman Bernanke, it’s no surprise that many will bring their attention to the State Street SPDR Gold Trust (GLD, A-). Gold is rather infamous for staging volatile reactions whenever the Fed Chairman speaks and, as such, GLD could see a surge in trading volumes today. Analysts are expecting the interest rate to remain unchanged at 0.25%, however, economic commentary issued after the rate decision itself should offer valuable insights [see GLD-Free Gold Bug ETFdb Portfolio].
GLD appears to be gearing up for a rally judging by its price action over the last week; this ETF has been slowly creeping higher since retesting support around $163 a share earlier this month. Although it’s encouraging to see GLD rebound higher off its steadily rising support level (blue line), what’s worrisome is the fact that this ETF recently failed to summit $170 a share. Bullish investors willing to jump in at current levels may find themselves scrambling to lock in profits sooner rather than later if GLD shows weakness as it attempts to summit its most immediate resistance level around the $170 mark [see 5 Important ETF Lessons In Pictures].
At the same time, entering into a long position at current levels is attractive; investors have an opportunity to tap into upside potential while still being able to closely manage their downside risk with a tight stop-loss around $162 a share [Download 101 ETF Lessons Every Financial Advisor Should Learn].
If the latest economic commentary from the Fed spooks investors, safe havens like gold may be in for a green day; in terms of upside, GLD has near-term resistance at $168 a share followed by the $170 level. On the other hand, an upbeat outlook from the Fed may bolster risky assets; in terms of downside, this ETF has major support around $162 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Follow me on Twitter @SBojinov
Disclosure: No positions at time of writing.