Medium term
Trade view / 19 July 2016 at 7:27 GMT

UPDATE: Taking profits from GLD short

Trader /
United States
Instrument: GLD:arcx
Price target:
Market price:

After my trade idea of July 11, where I said gold as represented by the SPDR Gold ETF (GLD) (GLD:arcx) is over-extended in the immediate to near term, we have seen a pullback in gold, and I am taking full profits.

Gold remains in a new and intermediate-term up-trend that I want to respect as the primary trend for my timeframes. Any "fades" of this trend, such as outlined in my July 11 trade idea, remain counter-trend, and I view them simply as cash-flow generating trades rather than the start of a new down-trend. 

Note on the multi-year weekly chart that the February breakout from the defined down-trending channel remains firmly in-tact, as does the low-yield and low economic growth environment more or less globally. 

SPDR Gold ETF (GLD) remains in a new, intermediate-term up-trend
GLD ETF Source: eSignal

On the daily chart, we see that since July 11 the exchange-traded fund has corrected more than 2%, and in my view the most severe of these near-term overbought readings have now been worked off. GLD has retraced back to its yellow 21-day simple moving average and to the up-trending former resistance line, which may now become support. To be clear, I would not rule out a further consolidation move lower in GLD in the near term, but the highest-probability part of this mean-reversion move lower in GLD now seems to have run its course. So I am happily taking profits.

SPDR Gold ETF (GLD) has retraced to (yellow) 21-day simple moving average
Source: eSignal

— Edited by John Acher

Non-independent investment research disclaimer applies. Read more

Bill_K Bill_K
I've spent quite a bit of time doing my due diligence into GLD. Would someone happen to know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? I do not see why the GLD managing organizations would give up this right because doing so made an substantial audit loophole. I don't believe I've heard any positive explanation for why this loophole exists. Additionally, the GLD organizations promise that this fund is 100% backed by actual physical gold but yet they staunchly deny retail investors the right to any of their listed physical gold.

I also recall there was a well documented visit by CNBC's Bob Pisani to GLD's vault. This visit was organized by the management behind GLD to prove the existence of GLD's physical. However, the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not show up on the bar list dated at that time. It was later discovered that this "GLD" bar was actually owned by ETF Securities.
Bill_K Bill_K
Did anyone try 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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