Even More Charts with Comments: GLD, GDX, SLV
I remain constructive on the SPDR Gold Trust (symbol: GLD). The fundamentals are strong. The price action looks like a double bottom. However, price is likely to close below the most immediate key pivot level (153.12). See figure 1. This is a break below support, and this is never a good sign especially when the fundamentals remain supportive. Markets that don’t do what we expect often move strongly in the opposite direction. My expectation is a double bottom, but a close below this pivot has me cautious. On the other hand, shake outs and fake outs do happen especially in bull markets. If GLD recaptures the 153.12, then it would be time to get long and strong. My best advice: watch the price action around the 153.12 pivot and act accordingly.
Figure 1. GLD/ weekly
I last looked at the Market Vectors Gold Miners ETF (symbol: GDX) on May 3, 2012, and I suggested a downside price target of 41.83. See figure 2. Bingo! That target was hit and price has bounced strongly at this level. So where to from here? 41.83 is support and 48.74 is resistance. In light of the gold picture above (re: caution), I would be a buyer of GDX towards support (41.83) as this is where the buyers materialized.
Figure 2. GDX/ weekly
Figure 3 is a weekly chart of the i-Shares Silver Trust (symbol: SLV).
Figure 3. SLV/ weekly
I was skeptical that we’d get that low on GDX, so kudos for that call.
If one looks at the Euro we have a major breakdown brewing. That is bullish for the US Dollar which should put downside pressure on gold, and indeed it has since it functions as an anti-currency.
So I would be skeptical of a bottom call on gold until I see a reversal on the dollar.
I would agree about the Euro but the negative correlation between the dollar and gold is not much as you would think….in fact, higher dollar has been the best time to buy gold over the past 12 years