Gold exchange traded funds rallied this month, but the precious metal is starting to look tarnished as the market moves back below its short-term trend line.
Gold prices are falling for the third consecutive day, with the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) down about 1.1% Wednesday. The selling pressure on Wednesday also sent the three gold ETFs back below their 50-day simple moving average.
With bullion prices unable to maintain their momentum, some gold watchers are advising investors to trim holdings.
“If you have any profits on this counter-trend move, I would take them and you can sell gold, as this downtrend has resumed in earnest,” Rich Ross of Evercore ISI said on CNBC.
Ross argues that gold is flashing a bearish signal after the metal was unable to break above its 100-day moving average.
“The inability to get back above that 100 day is a key failure that’s left gold vulnerable to further decline,” Ross added.
GLD was trading 0.8% below its 50-day moving average and 3.4% below its 100-day average Wednesday.
Meanwhile, COMEX gold futures were also down 1.1% Wednesday, trading around $1,126 per ounce. Ross believes that the next support level will be around $1,120, and if gold breaks below that level, bullion prices could continue to fall back to $1,100.
Dragging on the gold market, volatility is beginning to ease after markets try to recover from the swift correction – gold is seen as a safe-haven asset that provides a good store of wealth during tumultuous market conditions. Additionally, the U.S. dollar is beginning to strengthen against foreign currencies – gold is priced in USD, so further buying becomes pricier for foreign investors. [Safe-Haven Demand, Dovish Fed Help Gold ETFs Regain Ground]
“Gold does well when the dollar is weak and fear is high,” Ross said.”We’ve recently seen volatility come off, fear has subsided and dollar has firmed. All of which provides headwinds for gold and reinforces this key failure in the downtrend.”
SPDR Gold Shares
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Max Chen contributed to this article.