The SPDR Gold Shares (NYSEArca: GLD), the world’s largest gold-backed exchange traded product, retreated a bit last Friday, but still managed a weekly gain of almost 0.8%. That could be just one more incremental sign that gold is poised to breakout to new 2017 highs.
Gold may be tested in the near-term with another Federal Reserve meeting looming. Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.
“In addition, data out of Asia seems to confirm that physical gold demand has been increasing in both China and India which is adding support to physical Gold prices. With psychological resistance at $1300.00 just a few ticks above current price levels, we may see Gold prices begin to accelerate higher should resistance fail to hold and trend following commodity funds add to positions on a breakout to new highs for the year,” according to OptionsExpress.
Investors looking to remain involved with gold while guarding against dollar strength can consider the SPDR Long Dollar Gold Trust (NYSEArca: GLDW), which debuted earlier this year.
“From the end of 2013 through the end of 2016, the U.S. dollar appreciated against a basket of foreign currencies, and gold prices in USD declined from $1,205 per ounce to $1,146 per ounce, or a 5% decline. However, if an investor took away the strengthening dollar from the equation, gold priced in non-U.S. currencies, like the euro currency, rose from €873/oz to €1,096/oz, a 25% increase, according to Bloomberg data.
GLDW tries to reflect the performance of the Solactive GLD Long USD Gold Index, which is designed to represent the daily performance of a long position in physical gold and a short position in the FX Basket comprised of euro, Japanese yen, British pound, Canadian Dollar, Swedish krona and Swiss franc. The performance of the USD against the currency basket will determine whether the index increases or decreases the amount of gold held.
GLDW has attracted $27.2 million in assets since its January debut.
We do note the 20-day moving average has once again crossed above the 200-day moving average but it remains to be seen if upward price momentum will follow this normally bullish signal, which did not happen the last time this signal occurred in April. The 14-day RSI is strong with a current reading of 68.60. The April 17 high at 1300.30 looks to be the next resistance level for the August contract with support seen at the May 17 low of 1240.00,” said OptionsExpress regarding gold futures.
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.