By Stoyan Bojinov
With the presidential election now behind us, investors and traders alike will bring their attention outside of the political arena and back to the economic data front. While political ads and fervent opinions have largely dominated news mediums over the past few weeks, several major releases managed to slide under the radar amid all of the election jitters. More specifically, commodity prices across the board have faced growing headwinds. With resurfacing eurozone woes and ongoing improvements in the domestic labor market, coupled with a solid 2.0% GDP growth reading at home, the strengthening U.S. dollar has kept a lid on natural resources prices.
Despite all of the clouds of uncertainty looming over the U.S. and debt-burdened Europe, precious metals in particular appear to be taking cues from the positive economic developments instead, as showcased by their lackluster performance over the past month. Gold and silver prices have both endured steep corrections, although they appear to be holding above major support levels, thereby warranting a closer look from active traders waiting to jump in long. As such, below we discuss recent price action for the most popular commodity ETFs tracking each of these two metals, along with key technical levels that will likely come into play over the coming weeks:
Technical Outlook: SPDR Gold Trust (NYSEARCA:GLD)
(click images to enlarge)
After dropping 3% in October, shares of GLD finally appear to be regaining their footing at a level where it counts big-time; this ETF has managed to bounce off its 200-day moving average (yellow line), perhaps suggesting that the bulls were simply waiting for a healthy pullback before jumping back in. However, what’s concerning is the fact that GLD has previously staged “false reversals” after failing to summit the infamous $175 level (red line) as seen back in November of 2011, late February of 2012, and most recently, in early October. In terms of upside, this ETF has a clear path until it nears $170 a share, while major resistance lies at the $175 level. In terms of downside, immediate support comes in at around $162 a share, followed by the $160 level.
Technical Outlook: Silver Trust (SLV)
SLV’s chart bears close resemblance to GLD’s, as both are resting on their respective 200-day averages. The big difference, however, is that GLD remains on track to resume its longer-term uptrend, while SLV is struggling to get back on track. Since peaking at $48.35 a share on 4/28/2011, SLV has posted consistently lower highs (red line), along with worrisome lower lows. Its most recent up-leg is encouraging, however, since SLV managed to hold support above $25 a share this summer, just as it did on 12/29/2011. In terms of upside, this ETF has may face resistance as it nears $32 a share, followed by the $34 level. In terms of downside, SLV has major support around $30 a share.
Disclosure: No positions at time of writing.