Gold has been a very interesting trade this year, as investors expect inflationary increases to boost the yellow metal.
That has happened to some extent, with gold prices up 22% on the year.
While that gain is greater than the S&P 500 gain of 14%, it is dragging 40% cash earnings so far and wildly dragging a bitcoin run of nearly 170% in 2020.
Remember, legendary trader Paul Tudor Jones called bitcoin the “fastest horse” in the race.
His choice against gold and other dramas at a time when the Federal Reserve, Congress, and global central banks were taking unprecedented and coordinated action to combat the economic effects of the coronavirus.
With authorities printing more money and pouring stimulus into the economy, investors’ expected asset classes – like gold, stocks and bitcoin – are set to see big gains as a result.
With all that said, gold prices have recently dragged. Despite the recent bounce, gold prices are still 10% lower than the highest in August. Let’s look at the charts.
For the gold trade, I’m looking at the SPDR Gold Trust ETF (GLD) – Get a Report. As you can see, the stock has been locked in a down channel (blue lines) since peaking in August.
When I look at the daily chart above, I see a hoax. The $ 173.75 level had been a support over the past few months, but in late November the GLD definitely broke below this level, dropping 2%.
The following day, it dropped 1.5%, then tapped quickly below the 200-day moving average. That gap below the 200 days in combination with taking the low in the following session was the forgery, probably shaking many bulls.
After all, without the channel in play, GLD looked to be crashing.
Now, not only channel support has been held, but the stock has regained the 200-day moving average and the $ 173.75 key level.
Now things are getting interesting, as the shares are challenging channel resistance near $ 175. If the stock fails to clear this mark, I’d rather see the $ 173.75 level held as support, followed by the 200-day moving average.
I don’t want to see another low down, even if channel support holds up yet.
If GLD clearly resisted the channel, it has to compete with the 50-day moving average near $ 176.50. More notably, it faces the $ 179.25 level – which was support that turned to resistance – and the 100-day moving average.
Above those and the stock can fill the gap toward $ 183 and challenge the highest in November.