GLD: Gold, Coiled Spring Or Major Selloff Approaching?


  • With lower inflation readings many market participants are beginning to doubt that another rate hike this year is likely, with the chance of a December .25% hike at under 40%.
  • The upcoming debt ceiling debate as well as gridlock and instability in Washington could place a put under GLD/gold prices in the months ahead.
  • The North Korean situation is heating up once again, with more ballistic missile tests this weekend. Just the anticipation of a potential conflict could add fuel to the gold rally.
  • Numerous time tested technical indicators are suggesting that this appears to be a consolidation pattern before a breakout rather than a topping formation.
  • It appears that there may be a sufficient number of fundamental and technical elements to support a surge in GLD/gold prices in the days and weeks going forward.

SPDR Gold Trust (NYSEARCA:GLD) and gold are up approximately 12% year to date. Right now, gold is trading around the $1,300 level, which has proven to be a level of major resistance for several months now. So, does gold have what it takes to break through this resistance level and take GLD to new highs?

It appears that there are several technical elements, as well as major fundamental factors, that support a break out for gold and GLD from current levels.

About GLD

GLD is the largest physically backed gold exchange-traded fund in the world which offers market participants an efficient way to access the gold market. The ETF is an attractive alternative to trading gold futures for many market participants as it can be traded much like a stock on the NYSE Arca exchange instead of having to deal with alternative exchanges and trading requirements pertaining to futures contracts. Furthermore, GLD is an appealing alternative to buying physical gold, as investors get the same exposure to gold, but can buy and sell gold using GLD with great fluidity and do not need to worry about the hassle of dealing with the physical metal.

Since GLD is backed by physical gold and mimics the price movement of spot gold almost exactly, we will use GLD and gold interchangeably during this analysis.

Future FED Policy

The market certainly doesn’t think further rate hikes this year are very likely, and for good reason. The FED may be more cautious regarding further tightening due to a lower inflationary environment. The CPI has been solidly trending bellow 2%, and appears to be headed lower judging by recent disappointing readings of 1.6%, and 1.7%. Other inflationary indicators such as wage growth, and PPI have also begun to trend lower in past months.

This article was written by

Victor Dergunov profile picture
The #1 Service For Diversified Portfolio Profits

Hi, I'm Victor! It all goes back to looking at stock quotes in the old Wall St. Journal when I was a kid. What do these numbers mean, I thought? Fortunately, my uncle was a successful commodities trader on the NYMEX, and I got him to teach me how to invest. I bought my first actual stock in a company when I was 20, and the rest, as they say, is history. Over the years, some of my top investments include Apple, Tesla, Amazon, Netflix, Facebook, Google, Microsoft, Nike, JPMorgan, Bitcoin, and others.

Disclosure: I am/we are long GLD, NEM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We are long gold mostly through gold futures, and call options in GDXJ

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