GLD's performance has caught my attention (as well as many others) over the last few weeks. It is hard to ignore that gold looks pretty attractive at the moment given the macroeconomic forces that are at play today. Before we dig into the technicals, let's remind ourselves of the following:
Fundamentals:
Now let's take a look at the chart. GLD has just broken the 2011 Labor Day Weekend ATH. Keep in mind that is in nominal dollars. If we added inflation to the mix, we are still under the ATH of 2011 and way under the ATH of the 1980s. Nonetheless, the chart seemed to like the nominal ATH and broke right through on strong volume, currently sitting around 4% higher than the LDW 2011 highs.
It is pretty clear GLD is set to keep moving up for the time being. We have set a new high on strong volume, which is the first indicator that GLD is set for a new trend to the upside and out of the sideways trade we have been in for 9 years now. That being said, confirmation is still needed. The following points give me hints that we are due for a pullback (in order of importance):
Long positions around the 186-7 level look great, as there could be lots of upside with minimal risk via stop loss management. If the price keeps falling, the 175 level looks even better.
Fundamentals:
- Central banks all over the globe lowering interest rates and printing fiat due to the pandemic.
- A lack of faith in the political leadership in many western countries (which is very justified).
- The dismal economic data. Bad economies make the previous two points more relevant.
Now let's take a look at the chart. GLD has just broken the 2011 Labor Day Weekend ATH. Keep in mind that is in nominal dollars. If we added inflation to the mix, we are still under the ATH of 2011 and way under the ATH of the 1980s. Nonetheless, the chart seemed to like the nominal ATH and broke right through on strong volume, currently sitting around 4% higher than the LDW 2011 highs.
It is pretty clear GLD is set to keep moving up for the time being. We have set a new high on strong volume, which is the first indicator that GLD is set for a new trend to the upside and out of the sideways trade we have been in for 9 years now. That being said, confirmation is still needed. The following points give me hints that we are due for a pullback (in order of importance):
- Extensive 8 week rally. There are only a few times this has happened in the past, and most of those times resulted in down weeks afterwards.
- The current price of GLD is around 9% away from the 20-day EMA, which is almost twice the difference in the 2011 highs. This is telling me that we may be overextended on the short term, but long term prospects look good (lots of momentum).
- RSI is extremely overbought (most in decades).
- Minor MACD divergence (3.5%).
Long positions around the 186-7 level look great, as there could be lots of upside with minimal risk via stop loss management. If the price keeps falling, the 175 level looks even better.