The Technical Take: Gold ETF

Figure 1 is a monthly chart of the SPDR Gold Trust (symbol: GLD). The breakout (blue up arrows) from the extended base resulted in the strong surge in GLD shares over the last part of 2009. Gold's parabolic move resulted in selling in December, but as long as prices remain above the breakout point, gold and GLD should be bullish. This level of support is at approximately $96.

Figure 1. GLD/ monthly

That's the long term picture.

The intermediate term picture is a little less bright despite today's strong move, and as of last week, I have a "sell" rating on GLD despite the big picture remaining positive. The presence of the negative divergence bar (i.e., the price bars in pink) on the monthly chart implies a trading range. The low of the current negative divergence bar comes in at $105, and coincidentally, this corresponds to the bottom of the trend channel drawn from the November, 2008 lows. See figure 2 a weekly chart of GLD. I would not be surprised to see GLD retest this area.

Figure 2. GLD/ weekly

Lastly, let me put some of my prior comments on gold in context. Back on April 30, 2009, when gold was trading at $895 per ounce and GLD was at $87, I wrote an article suggesting that gold was on the appropriate launching pad for a sustainable move. Although I was uncertain of the direction, I did write that "the current set up offers a low risk entry for going long gold". On October 5, 2009, I followed up with "Gold: Off The Launching Pad". GLD ran up 20% over the next two months.