It’s nice to see gold catching some bids lately. One theme to emerge in the first half of 2013 seems to have been “kick the crap out of gold bulls” as it continued the downtrend started in 2011. Don’t get me wrong. Gold is still in a downtrend, but the recent price action has created an interesting setup.
Looking For A Flip To Support
Since the SPDR Gold Trust ETF (GLD)’s last attempt to rally in late-2012, the 50-day moving average (green line) has acted as a solid form of resistance. With yesterday’s move, bulls were able to get a close above the moving average and are likely now praying that it flips from resistance to support.
In April and May of this year, GLD appeared to have been trying to put in some support at $130, but eventually lost out as bears forced it to gap down taking the commodity ETF $15 lower. While we're back at that support level, we're testing it from its underbelly. Pre-market, it seemed we' d stay below $130, though I’ll be watching to see if traders can collectively fight back above and hold that level.
- The Relative Strength Index (RSI) has been stuck in a bearish range for the last nine months. However, with this recent bout of upward movement, momentum has broken back above 55. Ideally we would like to see buyers keep the RSI above 50 to insure confidence in the current upswing.
- The On Balance Volume indicator simply adds volume of up days and subtracts volume on down days, giving us an idea of buying and selling pressure within the ETF. The downtrend in volume is still present but could be tested within the next week, or so, if we see some more high-volume advances.
Solid Short-Term Signals
Overall, gold looks to be healing some of the gaping wounds created over the last couple of years. Don’t get too excited. There's still plenty that has to improve for GLD to regain its uptrend, but these are good short-term signs that gold bulls need to hang on to in order for us to see further price appreciation.
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