Gold ETF poised to test key support

Stocks related to the precious metal have been under severe pressure, but the worst may not be over.

By Stock Traders Daily Dec 20, 2012 3:24PM

Gold Bars copyright Photodisc, SuperStockBy Thomas H. Kee Jr., Stock Traders Daily

 

Gold and the shares of gold miners have come under pressure recently, much to the dismay of gold bugs. Could there really be a material shift taking place in front of our eyes and could gold become even less favored than it has been recently? 


We hear them all the time, analysts calling for $2,000 gold prices. The more they print the higher gold will go they say, but with the Federal Reserve now on track to print $85 billion in new money every month on an endless basis, instead of increasing as many would have guessed gold prices and the share prices of gold miners have fallen considerably.

 

Over the past three months Newmont Mining is down about 21% (NEM), Gold Corp (GG). is down about 22%, Barrick Gold (ABX) is down about 20%, and RandGold (GOLD) is down about 17%, but the exchange-traded fund (ETF) that everyone interested in gold follows is SPDR Gold Shares (GLD), and it is down only about 5% over the same three-month period.  


Although global mining slowdowns across the globe have something to do with the price declines of gold miners as well as other mining companies the declines of these gold miners may be telling us something about the future price of gold itself. Specifically, the weakness in these gold miners could be a precursor to additional declines in GLD.

 

Fundamentally nothing seems to have changed, they are printing $85 billion a month out of thin air, but a material change has actually occurred and this has skewed investor's interest in Gold. Interest rates have begun to increase even in the face of these endless stimulus programs, global weakness has kept the dollar strong when it otherwise would have been devalued considerably, and although anyone trying to buy a new car, groceries, or anything else for that matter, might argue with me, inflation also is not serious enough for gold to react positively. These three catalysts not only are keeping a lid on gold prices but they may also be exactly what are causing gold prices to decline. 

 

How long will this last?

 

According to the real-time trading reports offered by Stock Traders Daily the declines can continue.  Although trading reports are offered for all of the companies listed here, including other miners that may not have been mentioned in this article, our focus is on gold so GLD is our primary interest today. According to analysis by Stock Traders Daily, GLD is rapidly approaching longer-term support, it is very close to that level right now, and if longer-term support breaks lower GLD can fall to $139 quickly.  Longer-term support for GLD according to this detailed report is $158.48.

 

There are many variables that play a role in pricing gold, I have said many times before that the dynamics of these variables change so often that trading gold based on fundamentals is extremely difficult, but one thing cannot be argued with.  No matter what they say the market is always right and therefore the technical patterns are extremely important.  The market for gold and the gold miners, including GLD, are pointing to lower levels if these critical support levels break, and investors should pay very close attention to what the market is saying accordingly.

 

9Comments
Dec 20, 2012 7:36PM
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In my opinion, the reason gold hasn't taken off yet is due to the fact that all the fresh paper hasn't been put into general circulation.  Yet.  Once the banks start lending that paper out in volume, inflation should really take off.
Dec 20, 2012 6:05PM
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Where`s all these people that think gold is such a wonderful investment?
Dec 20, 2012 8:43PM
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Gold is and always has been a store of wealth Foxy.  The people who know this have not gone anywhere and are holding their gold like they have since it was $200 12 years ago.

 

Dec 20, 2012 8:51PM
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Hard to say Gold is a "wonderful investment"....It has done well before the downturn, and fairly well in the early part of the recession....IMO

PGMs....(gold,silver,others) Are only an integral part of investing, like any other diversification accomplishes....Getting caught in a buy and hold trap, I believe is a big mistake...

It has to be traded occassonally or you're just sitting on an investment that will not reward you because of certain outside forces or poor fundamentals of Companies. ie; such as Miners.

Dec 20, 2012 9:27PM
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Is that enough opinions on Gold, Foxy Blonde ?.....Glad to be of service..

I figured by now the "Gold Bugs" would have descended upon you....

But they have been a little quiet lately....Just waiting for their next moves ???

Dec 20, 2012 9:22PM
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Reality999.....As I see that as part of the problem, people sitting on gold since it  was $200, Have they MADE ANY MONEY WITH IT YET ???

Since 2000 gold has went up significantly, but without buying and selling, you are only hoarding for a more profitable day, or even more foolish...The END OF DAYS..

Since that same 2000, actually "somewhat less time", we have traded gold or gold instruments many, many times, about 15-25 times.....And have made 10s of thousands to diversify into other fairly stable Companies....Looking back I'm quite glad I am not still sitting on those same investments..

After selling most positions with Gold in the mid 18s range....We have been accumulating some back but only about 8-10% of investments because of Gold's stagnation process, that it has been in over several months.. At one time we held roughly 28-30% investments in Gold; But not today. 

Dec 20, 2012 8:59PM
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Someone.......We all know Aholes are running Washington...What does that have to do with a discussion on Gold.?.......Yeah, thanks for venting....NOT.
Dec 20, 2012 8:51PM
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It is BS like a lot of things going on here in the States.  Aholes running Washington.  Printing money out their A$$e$, making the cost of living shoot up.  The average Joe who can't afford to invest, but goes to work every day for a job that just barely pays the bills and does not give raises out that even come close to keeping up with infaltion is well, SCREWED.  Getting another job that pays better in this economy is laughable.  I'd have better odds playing the lottery.  Even better odds quitting my job and have everyone else pay for my existance with welfare and food stamps.  85 BILLION a month !!  Are you kidding me?  Instead of sending that to banks, start sending it to the working poor.  We need LEADERS in Washington, not SPENDERS.

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