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10 Takeaways From Gold's Chart


Gold sentiment indices are showing near record lows.

Today's chart is of SPDR Gold Shares (NYSEARCA:GLD). It seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets.

Click to enlarge

What I Am Looking At:
  • Year-over-year return is -18 percent and year-to-date return is -17%.
  • Round number and quite significant $150 level was breached last Friday, which ushered in an enormous wave of selling pressure.
  • Shares easily dropped down to slightly above the $130 level, which did have some significance at the end of 2010 into the beginning of 2011.
  • Coinciding with the $130 level is the uptrend green line (shown on chart) from the 2005 low.
  • 50% Fibonacci retracement level at $127 level.
  • Big put open interest for the April, May, and June series resides at the 130-strike, which may be supportive.
  • Short interest in GLD has come down 39% in the past two weeks but still represents nearly 4% of the float.
  • Margin requirements for gold futures were raised last night.
  • Gold sentiment indices are showing near record lows.
  • Capitulation? Possibly.
Strategy: Long trade could be established looking for mean reversion. Use stop under $130.

This article by Tony Venosa, CMT, was originally published on Schaeffer's Investment Research.

Below, find some more great content from Schaeffer's Investment Research:

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