Strategic trade
Trade view / 11 August 2016 at 9:35 GMT

Gold ETF – primary trend remains higher

Trader /
United States
Price target:
Market price:

Gold as represented by the SPDR Gold ETF (GLD) (GLD:arcx) so far for 2016 has rallied about 27% and is thus one of the very best performing assets. There have been trades along the way on the short side when the GLD overextended its rally in the near term, but the primary trend remains higher.

A basic principle of trend following and one by which to manage a trend is to buy low and take partial profits at the top of the respective trading range. This strategy has worked well so far in 2016 in gold and using the GLD ETF. Gold is now however reaching an even more important technical juncture from where a next leg higher could materialise.

The multi-year weekly chart reveals that while the bear market in gold from the 2011 highs down to the late 2015 lows was material in its magnitude but also held an important technical juncture as support. I marked this area around $100 with a  blue horizontal bar on the chart. The rally off those late 2015 lows has so far pushed the GLD back to the upper part of the two parallel lines, i.e. the trading channel and is now threatening with a potentially more meaningful breakout.

Gold ETF - GLD
Source: eSignal

On the daily chart we see that the GLD ETF in May bounced off its rising blue 100-day moving average and that this continues to be a good line of reference for risk management purposes. For the past month and a half the GLD has been consolidating below horizontal resistance around the $130 mark, which I highlighted with the black horizontal line. The longer GLD consolidates below this line without breaking down the better the odds of a more meaningful next leg higher.

Gold ETF - GLD
Source: eSignal

Management and risk description

From a risk management perspective technical support on the GLD stop loss areas would be $125, followed by $123 which is where the 100-day simple moving average comes in.


Entry: Buy the GLD upon a push above $130 on a daily closing basis

Stop: $125

Target: $140

Time horizon: 1–3 months

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
Bill_K Bill_K

I've been trying to do my due diligence into this fund. Anyone know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? Why would the organizations behind GLD forfeit this right and create such a glaring audit loophole? I have not heard a single good reason for the existence of this loophole thus far. It also doesn't help that GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion.

CNBC's Bob Pisani also made a highly publicized visit to GLD's gold vault in a segment called Gold Rush: The Mother Lode. GLD's administration organized this visit to show that GLD's gold actually exists. However, the gold bar held up by Mr. Pisani showed a serial number of ZJ6752 which did not show up on the latest bar list during that time. It was later found that this "GLD" bar actually belonged to ETF Securities.
Bill_K Bill_K
I'm also very curious if anyone tried calling the GLD hotline at (866) 320 4053 in search of numerical details on GLD's insurance. The prospectus vaguely states "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." When I asked about how much of the gold was insured, the representative proceeded to act as if he didn't know and said they were just the "marketing agent" for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.


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