A Technical Perspective on SPDR Gold ETF - ETF News And Commentary
February 20 2013 - 9:18AM
Zacks
After it attained multi year highs and ended last fiscal year in
the green for the 12th straight year, the yellow metal
seems to be struggling so far in 2013. The SPDR Gold ETF
(GLD) which tracks the spot prices of gold, is down about
4.13% so far this year.
![](http://staticzacks.net/images/zacks/blogs/1361385383.jpg)
In fact looking at the price pattern for the Gold ETF, it can be
said that it has been facing technical weakness for quite some time
now. After getting a sold boost post QE3 announcement by the
Federal Reserve, the ETF made its 52 week high, but failed to
sustain those levels.
The ETF had earlier formed bearish patterns during the latter
part of last year and has continued the weak momentum forward, into
this year. GLD has very recently broken through a very strong
support level of $160. Subsequently, the support breakout was also
characterized by another bearish triangle breakout as shown in the
chart.
Since the start of 2013, the price movement of GLD had been
exhibiting rangebound activity. However, what seemed like some sort
of consolidation around the $160 support mark was scrapped by the
bearish breakout.
It is also worthwhile mentioning that in the few trading session
following the breakout, the bearish bias has been very strong as it
is indicated by the high volumes. These volumes, ― shown in the
encircled portion in the volumes chart, were higher than the 50 DMA
volume line (read Two Unconventional Sources of ETF Yield).
Also, the more responsive 50 DMA line (blue) is on the verge of
a death crossing with the 200 DMA line (green). If it does this, it
will surely be bad news for GLD investors. As we can see the 50 DMA
line has already intersected the red 100 DMA line earlier.
Accordingly, the ETF is trading well below its key trend lines of
50, 100 and 200 DMA.
Having said this, it is prudent to note that after the vicious
sell off recently, the ETF has entered deep into the oversold
territory. The RSI with a reading of 25.53 and the Williams R
indicator with a value of -90.92 signify the oversold position
(read Palladium and Platinum ETFs to Soar?).
In this regard it is imminent that the ETF will probably witness
some sort of a rangebound activity or even a spike, in the
subsequent few trading sessions, just in order to heat up this
highly oversold counter.
Having said this, it is prudent to note, that the risk-on
environment has well and truly swept the market, with the equity
markets making new highs. Therefore, the safe haven nature of the
yellow metal has failed to make it a good candidate for investors.
Not to forget that the inflation levels are still very low
irrespective of the Fed’s easing. Therefore the hedge against
inflation also does not seem to be working for gold.
Therefore, at least in the short term the outlook for the Gold
ETF GLD seems to be headed in the wrong direction. However, with
the equity markets due for a ‘healthy’ correction (if not
downturn), the safe haven is bound to return for the yellow metal
(see Do Large Cap ETFs Signal Trouble Ahead?).
Furthermore the Federal Reserve seems determined enough to
continue their monetary easing till the inflation and unemployment
threshold levels are met − which by the way, are quite far from
current levels. These are most probably going to be the driving
factors for the ETF especially in the longer term.
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