Short-Term Gold Liquidation May Have Damaged Gold in Longer Term

Major sell orders took the strength out of gold this morning and the shiny yellow metal is down by $22.70 at $1718.18 (or down 1.3%). What may be more important for longer-term traders who are not watching the second by second trading is that this represents a chart failure. If you look at the stock chart (from stockcharts.com) below you will see that the SPDR Gold Trust (NYSEMKT: GLD) has now failed to remain above its 50-day moving average. That is up at $168.85 and the drop is now down to $166.44. Based upon longer-term trends that implies another $3 or so in downside per share of this ETF (close to $30 per ounce of gold).

The catalyst today was a large seller selling some 15,000 contracts which were liquidation trades early on. This brought on more selling. It is interesting that a short-term trade has created what may be a longer-term failure. The good news is that gold has at least tried to recover since this morning’s drop.

Silver, a.k.a. The Devil’s Metal, is holding up far better today. This is interesting considering that silver is often a leverage or more speculative metals play than gold is. The silver ETF the iShares Silver Trust (NYSEMKT: SLV), is down almost 0.8% at $32.67. This is right back above the 50-day moving average of $32.63 so we would be watching these levels closely here.

JON C. OGG