Gold ETFs have been trading in a narrowing range for many months but some technical analysts think the consolidation period is drawing to a close and that the next major move will be higher.
SPDR Gold Shares (NYSEArca: GLD), the largest bullion-backed ETF, has gained about 5% year to date. Other ETFs tracking the precious metal include iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL).
GLD is “holding a tightening range which has been developing since September last year,” said Tarquin Coe at Investors Intelligence in a recent newsletter. “That range has the form of a triangle with classic skirmishes across its borders. Triangles are consolidation patterns so the prior the uptrend is expected to soon resume.”
Gold prices have been trending lower since the beginning of March but have held above $1,600 an ounce. Bulls say the Eurozone debt crisis heating up again or more quantitative easing from the Federal Reserve could put gold back on track.
“Moving average action supports that likelihood. The 50-day exponential moving average is homing in on the 200-day EMA. Averages often behave like this following a strong move and then once they meet it marks correction completion,” Coe said.
“With the sideways drift of the past nine months almost over longs are worth considering ahead of the next up leg,” the technical analyst added.
SPDR Gold Shares
Full disclosure: Tom Lydon’s clients own GLD.
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.