In my March 5 article, "The Winds Are A Changin' For Gold," I discussed the importance the 150-day simple moving average (SMA) has had in the price of gold (NYSEARCA:GLD) during the Fed's three years of adventures with QE. Since breaking its 150-day SMA on Feb. 29 the moving average acted as resistance in the gold price bounce immediately after the Leap Day massacre, and since then gold headed much lower. In recent days, however, gold has found solid support at levels it reached during the sell-off that ended last December. During the month of May, GLD tested support levels on three consecutive Wednesdays (May 16, 23, and 30), and each time the support level held.
At this time, gold (NYSEARCA:IAU) seems to be in no man's land, an area between the support levels of late December and mid- to late May and the resistance level at the 150-day simple moving average. For traders, this is a region where you would want to "buy the dips and sell the rips" until a breakout in either direction occurs.
For long-term investors in precious metals, myself included, there is no reason to feel any urgency to add to positions at current levels. After a bull market that has lasted for years, most long-term investors have likely accumulated positions of sufficient size and at prices much lower than where we are today to feel comfortable with gold's current value in fiat currencies. So, movements within the current price range seem better left for traders to worry about.
In terms of silver (NYSEARCA:SLV), the chart is much choppier than that of gold, but, like gold, it is trading at support levels from 2011 and May 2012. The silver chart does show two distinct lower highs from August 2011 and February 2012 (relative to the April 2011 high), so I would categorize silver's no man's land as being between the support levels recently reached and the downtrend from connecting the highs of April and August 2011 with the high from February 2012. For SLV, that is around the $32 to $32.50 level and heading lower every day.
On a closing note, I would like to mention that the miners (NYSEARCA:GDX) have finally begun outperforming the precious metals. I've noted in previous articles that since its inception, GDX has underperformed GLD in a major way. However, over the past couple weeks that has begun to change. After the incredible beating the miners took from September of last year until May of this year (GDX down 41.65%) compared to declines of less than half that amount for gold, it's not surprising investors are taking a shot with the miners. I, too, joined the miners party, initiating a position in Newmont Mining (NYSE:NEM) during the month of May. Just because gold is trading in no man's land doesn't mean there aren't other investments in the precious metals complex to be made.
Finally, if you are a long-term gold investor interested in a bit of an unusual way to get long gold, consider reading my article "A Different Way To Get Long Gold."
Disclosure: I am long NEM. I am also long gold and long silver.