More Cold Days For Gold (GLD, SGOL, GDX, GDXJ)

It has been hard to not notice the sideways trading action in gold of late.  Sure, you have the potential decline of the Euro, the rising dollar, mixed economic data globally, China keeping the brakes on to stall inflation and to prevent overheating, and more.  Throw in Bernanke promising to keep rates very low despite a hiked discount rate.  But now we have some new developments in the charts.  We are looking here at the SPDR Gold Shares (NYSE: GLD) and ETFS Gold Trust ETF (NYSE: SGOL).  Adam Hewison, at our affiliate INO who called for gold to run from $900 late in 2009 to $1100 and then $1200 or higher, has a new audio-video using an interesting technical analysis to explain why gold may have another month of trouble ahead.

We usually use Bollinger Bands or other rolling indicators in stock analysis, but Adam was using Donchian Channels which he noted has been tested since the 1940’s.  Based on channels and a series of lower highs and lower lows, Adam is calling for more weakness.  In fact, 17 days is what he said based on a 40-day basis.
Many investors try to use the gold miner ETFs such as  Market Vectors Gold Miners ETF (NYSE: GDX) and the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) but when we look for long-term gold trends we tend to look directly at the ETF and exchange-traded products that track the price movement of gold.  In gold miners there are often just too many variables like labor and geopolitical risks that can arise… as well as crucial environmental issues, disasters, and accidents which can all create mine shut-downs.

What is interesting in this analysis from Adam Hewison is that the most recent high is lower than a recent high Adam pointed to.  But it is actually higher than the most recent high put in.  Now gold is trying to make a stand at $1,100.00 per ounce after seeing steady declines.

Here we use the SPDR Gold Trust Shares (NYSE: GLD) and notice that the 50-day moving average has been a magnet for the last week and we are seeing what may be a failure of the moving average.  The GLD is at $107.95 today and the 50-day moving average today is $108.42.  We are not looking for anything sinister here for a breakdown to the $100.96 for today’s 200-day moving average, but we also can’t help but notice tat the 100-day moving average of $108.14 is coming into play.

With rumors of China or another large buyer buying, this call set-up looks interesting.  By our take there is downside risk to $106 and maybe $105 in the near-term and it seems that even a breakout on geopolitical news would be signaling resistance at each $0.50 to $1.00 incremental handle to the upside.  This puts a more risk than reward if we just read the charts.

JON C. OGG