Gold Is Fast Approaching A “Break-Out Or Fake-Out” Moment
Written by Sean Brodrick
Gold is fast approaching a “break out or fake out” moment. The big money is likely laying even bigger bets - and the volatility in the next week could be enormous. What do I mean by that? Check out the chart below:
The chart of the SPDR Gold Trust (NYSE: GLD), the world’s biggest physical gold ETF tracks the price of gold very closely...[While] you can also see a downtrend that started in August of last year, gold and the GLD are banging up against that downtrend right now. That has caused gold to pause and pull back a bit. Naturally, today’s pullback in metal is multiplied in gold miners.
Traders have racked up a sweet week of gains. Now they’re ringing the cash register and running for the exits. That kind of short-term thinking isn’t the way to play this. Gold requires a long game. The next few days should tell us whether gold is really breaking out or if it’s a fake out, and gold has to go back and test its uptrend again.
...Long- and shorter-term forces are lining up to drive the gold price higher but in the very short term, Washington politics could be key, as entrenched powers fight over health care, taxes and more.
This is edge-of-your-seat stuff. We could see huge swings in either direction and, while I strongly believe the big trend is higher, a short-term pullback wouldn’t be surprising. Heck, this market is so volatile, they should rename gold, “dynamite”!
Conclusion
You don’t have to buy anything ahead of the next big break - there will be plenty of time to hop aboard gold’s next big bull run - but if you’re the type who looks for sweet entry points, a politics-related pullback could be just what you’re waiting for.
...Year-to-date, GLD has gained 8.27%, versus a 4.70% rise in the benchmark S&P 500 index during the same period.
GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #3 of 33 ETFs in the Precious Metals ETFs category.
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Thanks Alexander. Very enlightening.
"The chart of the SPDR Gold Trust (NYSE: GLD), the world’s biggest physical gold ETF"
As someone who spent considerable time doing his due diligence into this fund, I find this statement to be questionable at best. Paper gold GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion. This fact alone would mean GLD shares are nothing more than paper at the end of the day. Furthermore, GLD’s prospectus is chalk full of weasel clauses and legal loopholes that allows the fund to get away without the full physical gold backing. One good example of this is the clause that states GLD has no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this audit loophole.
For anyone interested but have not heard about CNBC's Bob Pisani's visit to GLD's gold vault, I recommend checking it out. His visit is documented in a segment called Gold Rush: The Mother Lode. This entire segment was organized by GLD's management to prove that their gold actually exists but the gold bar held up by Mr. Pisani displayed a serial of ZJ6752. This serial did not show up on the latest bar list during that time. Cheviot Asset Management’s Ned Naylor-Leyland discovered that this "GLD" bar actually belonged to ETF Securities.