When Gold Is Not Risk Asset Nor A Hedge… Gold to $1,500? (GLD, GDX)

During some points in the market cycle, gold is a hedge against the dollar.  Sometimes it is a risk-on trade that follows the stock market as though it was its own sector.  And during some periods the shiny yellow stuff is the ‘end of the world’ trade.

And sometimes, gold just trades around its charts.  Yesterday we showed how many of the key gold mining stocks were trading at 52-week lows and were starting to look like bargains for patient investors.

Carter Worth of Oppenheimer was on CNBC Thursday night offering some price action in gold by reading the charts.  When it came to gold, Mr. Worth gave a one-word summary that leaves no room for interpretation: “Terrible!”  Worth talked about the 150-day moving average turning down and awful relative strength.  His target as of now: $1,500 on gold.

With it being late on Friday, gold is down about $1.90 per ounce at $1,655.40, so Worth sees another 10% drop in the price of gold.  While he talked about hedging with miners, a 10% drop in gold would likely not help out the Market Vectors Gold Miners ETF (NYSE: GDX) even if it is up $0.05 at $50.19 on a day when gold is down.  If the gold market does go back down to $1,500 per ounce, the same corresponding move would be expected in the SPDR Gold Trust (NYSE: GLD) and it is down 0.3% at $160.80 today.

JON C. OGG