GLD Could Fall Further
Commodities markets have been somewhat overlooked over the last few months as most investors are focused on the new record highs that have been posted in most of the major stock benchmarks around the world. But it will continue to be important to monitor activity in areas like gold and silver, as we are likely to start seeing more potential investment opportunities in the weeks and months ahead. Most of the market activity in both of these assets has been negative in terms of momentum this year but this type of scenario makes things ideal for those that are willing to implemented contrarian strategies.
Here, we will look at some of the recent chart activity in SPDR Gold Trust ETF (NYSE: GLD), as this is the most commonly traded gold ETF and many of the underlying analysis can also be applied to assets like the iShares Silver Trust ETF (NYSE: SLV). At the momentum it is looking like the prospects for higher interest rates at the US Federal Reserve could put added pressure on prices and this ultimately means that it is not the best time to enter into contrarian long positions in assets tied to gold ETFs.
Chart Perspective: SPDR Gold Trust ETF (NYSE: GLD)
Source: DailyForex
When we look at the chart above, we can see that there are constantly lower lows in the GLD ETF. The series of lower lows is being matched by the declining MACD indicator on the daily charts which is now rolling over in negative territory. Below, psychological support still lies near 110, so we will need to see a definitive break there in order to expect accelerated declines. In any case, the balance of the evidence seems to suggest that we are headed for more losses in the GLD ETF, so it is not looking like the best time to start buying into the longer term weakness that has been present in this metal and its assets.
Added factors to consider can be seen in the rising US Dollar, which is another asset that stands to benefit from any changes in interest rate policy from the US Federal Reserve. Gold is priced in Dollars and the greenback has posted extensive gains against its commonly traded counterpart in the Eurozone. If this continues, it could put added upside pressure on assets like the PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), and there is an inversely correlated relationship between this ETF and the GLD ETF. Traders should be keeping this relationship in mind when trading any of these assets.
