Gold: A Low Risk Short Possibility

The 10 day intra-day chart of the Gold ETF (GLD) displays a low risk short possibility for Gold.

A break of $63.50 could lead to a sharp down move, which could bring the Gold ETF down to at least $60-$61 (100 day moving average) perhaps even to $58-$56 (200 day moving average). The stop for this trade could be set between $64-$65 (depending on your risk tolerance).

The exponential increase in Gold from late March 2006 until mid May 2006, when Gold reached $730, indicated a possible temporary end of the strong bull market in Gold. I think this thought was confirmed by the sharp fall from mid May 2006 until mid June 2006. These two extreme movements suggest that Gold will be a little bit more quiet than it has during the last 3 months.

I think the sharp recovery in the last 4 weeks (from $541 to $676), which seems to be aborted by the reversal day on July 17th, offers a good opportunity to profit from a possible second test of the lows around $540. Regarding the fundamentals, a possible slow-down of the world economy could lead to a temporary cooling-down of the current bull market in commodities.

Gary Dorsch recently published an interesting comment on Gold, which also suggests a slide towards the double bottom. On the other hand, David Andrew Taylor is still bullish on Gold.