Limping to the end of what has been a dismal year, gold futures and exchange traded funds backed by physical holdings of bullion could face more pain if key technical levels are violated.
Clinging to the $1,200 area during Monday’s Asian session after last week’s 2.5%, gold futures are in danger of seeing $1,180 an ounce sooner than later. The $1,180 an ounce area is viewed by gold traders and technical analysts as critical because, from there, things could get ugly in a hurry. [Trying to Find a Bottom for Gold]
“The break from $1,180 to $1,150 has the potential to be a 24-hour move. Low liquidity, major downtrend, important support. It really is all lining up for a potential massive move to the downside,” said Steven Dooley of Forex Capital Trading Pty. in an interview with Bloomberg.
Once the move below $1,180 occurs, gold will see $1,150 an ounce in short order and from there, the yellow metal will head toward $1,035, which was last traded in October 2009, Bloomberg reported.
For much of October 2009, the SPDR Gold Shares (NYSEArca: GLD), the largest gold ETF, traded in the $101-$103 area. GLD closed near $116 last Friday and is down nearly 29% this year. The Market Vectors Gold Miners ETF (NYSEArca: GDX) was more volatile in October 2009, trading in a range of just over $42 to over $48, either of which is more than double the ETF’s Friday close of $20.53. [A Bad 2014 Sequel for Gold ETFs]
Investors continue to pull assets from gold ETFs. “Assets in the 14 biggest exchange-traded products dropped 27.78 metric tons to 1,785.52 tons in the week ended Dec. 20, the most since the period to July 5. Holdings reached a record high of 2,632.52 tons on Dec. 20, 2012,” according to Bloomberg.
GLD and the iShares Gold Trust (NYSEArca: IAU) both rank among the 10 worst ETFs in terms of 2013 outflows.
SPDR Gold Shares
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD.
The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.