Periodically on Scott’s Investments I analyze the technical picture for Gold and its corresponding ETF, GLD (SPDR Gold Shares ETF). Gold and GLD struggled mightily in December but have rebounded in January. With the strong sell-off in December Gold’s strong uptrend looked to be in trouble, however the January rebound has staved off a complete breakdown.
Looking at the monthly chart for GLD, you will see a strong upward channel (in red) that began in 2008. Of note is the brief breakout of the channel in 2011, which resulted in a strong sell-off the subsequent month, bringing GLD back within the channel:
In the chart above, important support levels are drawn in green and a resistance level is drawn in red at August’s closing price of $177.69. In the midst of the sell-off in December, I noted $140 looked to be a strong level of support if GLD continued to decline. $140 remains a support level, but now that GLD has found support within the channel, the channel itself again becomes an important support and resistance level.
Since 2009 the 10 month simple moving average (in blue) has closely aligned itself with the bottom of the channel. GLD currently resides above the 10 month moving average, although the break below the 10 month SMA in December was the first significant break below the average since 2008. Also, we see the 10 month average migrating to the middle of the channel, a reflection of the slowing momentum in recent months.
Gold has lost some of its “mojo” in recent months but it is clinging to its upward trend. In order to still consider GLD in an uptrend it will need to close January above its 10 month moving average and above the bottom of the long-term channel.
For daily analysis of gold, check out Chris Vermeulen’s Gold, Oil & Index ETF Trading Analysis
