Friday’s ETF Chart To Watch: GLD Rebound In Danger Ahead Of Unemployment Data

by on August 2, 2013 | ETFs Mentioned:

This week has proven to be quite uneventful as corporate earnings have offered no major surprises while investors had a fairly muted reaction to better-than-expected GDP data. Nonetheless, the bull train continues its ascent as the S&P 500 Index was able to peer above the 1,700 mark for the first time in history yesterday as investors welcomed upbeat weekly jobless claims data ahead of today’s highly anticipated monthly labor market report [see The Complete Visual History Of SPY].

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 monthly employment data. Analysts are expecting for the July nonfarm payrolls figure to come in at 175,000 compared to last month’s reading of 195,000, while the unemployment rate is expected to tick down to 7.5%. 

Chart Analysis

Consider GLD’s one-year daily performance chart below. Gold prices have endured a harsh decline over the past year as “bull fever’ has permeated the equity market, sending investors out of the safe havens and into risky assets. GLD has rebounded quite steeply in recent weeks after sinking as low as $114.68 a share on 6/28, offering investors some hopes of a trend reversal. We remain bearish on GLD  from a longer-term perspective given the technical pattern at hand, along with overarching fundamentals; first, notice how this ETF has posted lower-highs (red line) and lower-lows since the start of the year and now appears to be struggling at resistance once again [see How To Hedge With ETFs].

Click to Enlarge

Furthermore, recent talks of the Fed scaling back on bond-repurchases would mean that “free money” is coming to an end, which was a main price driver for gold in the beggining stages of the domestic recovery; also, with no fears of inflation on the horizon, gold has few positive catalysts to confirm that recent gains are signaling a major trend reversal [see How To Swing Trade ETFs].

Outlook

If the latest employment data strikes a bearish tone with investors, gold prices could continue their rebound; in terms of upside, GLD has stiff resistance at $130 a share. On the other hand, encouraging employment data should inspire a rally for stocks that will likely draw demand away from precious metals; in terms of downside, GLD has immediate support around $125 a share followed by the $115 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.