Gold Still Losing Its Glimmer

Includes: GDX, GLD, SLV, USO
by: Stock Traders Daily

By Billy Fisher, Stock Traders Daily

The precious metals space has experienced a great deal of volatility as political minds have fought to restore some semblance of order on Capitol Hill. There are other fundamental trends that have been exerting themselves upon commodities as well. The upheaval could lay the groundwork for some attractive trading opportunities in the coming weeks. Here is what to look for.

End of a Golden Era?

The price of gold is coming off of its sixth straight week of decline after it was reported that the FOMC could end its $85 billion of monthly bond buying this year. The SPDR Gold Trust ETF (GLD) fell 0.5% on Friday.

Is the precious metal set to bounce back or could it continue its slide? "If GLD breaks longer-term support, it can fall to $141," says Tom Kee Jr., president and CEO of Stock Traders Daily. "Our report and my additional technical analysis indicate that GLD may actually be developing a downward trend."

GLD closed at $160.47 on Friday.

The Market Vectors Gold Miners ETF (GDX) has experienced similar headwinds in recent weeks. The fund traded sideways during the month of December and is down 15.5% over the course of the last three months. This deterioration has left investors in the ETF circling their wagons as the 50-day moving average of GDX is threatening to break below its 200-day moving average.

Supply Factors

Another precious metal play that bearish traders can set their sights on for a possible short is the iShares Silver Trust (SLV). Poor man's gold has also been backpedaling. It has been facing some of the same headwinds as gold and could see a significant uptick in supply from Peru coming to market in 2013. In mid-December, the Peruvian miner Volcan said its production should rise by 40% this year.

The iShares Silver Trust peaked in 2012 shortly after its 50-day moving average broke above its 200-day moving average. The 50-day is still hovering above the 200-day, but if a crossover occurs to the downside, the fund is likely to bottom out at a significantly lower level.

One other commodity play for traders to look at in the coming days is oil. The United States Oil Fund LP (USO) has risen 4.7% during the last five trading sessions. It may be time to take profits on this upswing. The lower than expected decline in crude inventories reported on Friday could weigh on this ETF up until the Department of Energy releases its next inventories report on Wednesday.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Neither Mr. Fisher nor Stock Traders Daily receive compensation from the companies mentioned herein for writing this article.