Gold Prices Approaching A Key Support Area

Posted in GOLD (GLD) on January 1st, 2013 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

Despite weakness in the U. S. Dollar, gold prices have continued to drop with technical oscillators positioned bearishly on the weekly time frame. That being said, a key support area does appear to be within striking distance. A reasonable assessment suggests that a test of two separate trend lines, which intersect at the $152.60 level on the SPDR Gold Shares ETF (GLD), appears to be target of the current selloff.  Although that level represents a 4.8% decline from Friday’s close, it is a reasonable target considering that weekly technical studies are not yet in an oversold condition.

Even though GLD has already made a 12.6% correction from its September 2011 high of $183.51, some observers suggest that long positions in gold remain an overcrowded trade on the margin. In addition, it does appear that the Federal Reserve from a monetary stimulus standpoint has already thrown “the kitchen sink” at the dual goal of reflating prices generally and helping to improve the employment numbers. Thus, the uncertainty remains with the size and specifics of fiscal policy, which is likely to act as a drag on economic growth depending on the degree of its scope. The more restrictive fiscal policy becomes, the more likely downward pressures on precious metals will continue unless, of course, nominal economic growth expands.

In any event, if oversold conditions are present when the $152.60 level is met on GLD, buyers will likely emerge to take advantage of the opportunity.


Has Gold Hit An Intermediate-Term Top?

Posted in GOLD (GLD) on August 29th, 2011 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

On weekly bar charts, GLD (the largest gold ETF) hit an all-time high of 184.82 on Monday August 22nd. When it did, it hit key trend line resistance seen on a semi-log scale drawn off the highs of May 12, 2006 and of March 17, 2008. It also hit another resistance trend line drawn off the lows of May and June 2008 as well as the highs of September 29, 2008, February 20, 2009 and December 3, 2009. What does all this mean? It means that the 184.82 level on GLD is important over the intermediate-term. Overbought stochastic and RSI readings on weekly charts add to the importance of this level.

With a “gap” at 163.87 on GLD left “open” on August 5, 2011 (which is roughly equal to $1,650 for nearby gold futures), many technicians expect a pullback to that level to occur sometime soon. Worries that Federal Reserve Chairman Ben Bernanke could have introduced another round of quantitative easing at hisJackson Holemissive did not materialize. And although the absence of such stimulus should have calmed the gold markets down, it did not. Worries over Greek sovereign debt began to fester once again, along with the uncertainty of how the European Central Bank and its President Jean-Claude Trichet might handle that deteriorating situation. As a result, a partial recovery in gold prices was triggered by week’s end.

From this vantage point however, a “retest” of the 184.82 area on GLD should offer an opportunity to “lighten up” on GLD or gold for the intermediate-term. A solid surge above it, however, would suggest that a new and steeper trajectory for gold prices, and the fear that it represents, could emerge instead.