A Quick Look at the Gold Chart
- Posted by JC Parets
- on June 6th, 2012
I think this is one of the most interesting things going on right now in the markets. With all of the extra uncertainty in the fiat currency space around the world, there’s only one of them out there that can’t be diluted. I always like to price assets in Gold, as opposed to US Dollars, to get a better idea as to the Real value of what were looking at.
A few weeks ago we put up a post suggesting that US Equities were about to roll over relative to Gold. After three quarters of outperformance, all of the major averages (S&P500, Dow Industrials, Russell2000, Nasdaq100 etc) appeared to be topping when priced in Gold. Today we’ll take a look at just the absolute value of $GLD. And there is some really interesting action going on here too.
Look at the big rally off the early 2011 lows. The SPDR Gold Trust Shares ($GLD) rallied 45% in 7 months. Since the peak in August, gold has been consolidating in a triangle like formation. What I love most about this chart is the brief whipsaw, or false breakdown, below the lower trendline. $GLD managed to quickly break down and successfully tested the 61.8% Fibonacci retracement of that massive 2011 move. Since then, gold has recovered to reenter this consolidation, perhaps gathering enough momentum by shaking out those weak hands to break out above and beyond the upper trendline:
I thought this was a really interesting chart of $GLD. These are my favorite setups because we have a defined risk/reward and a pivot point to trade off. If $GLD rolls over again, then we know we’re wrong and it’s time to look elsewhere. But when we know that a longer-term trend is in place, in this case Gold outperforming equities for 13 years as well as making all-time highs on an absolute basis, we look for entry (or reentry) points along the way.
I think this is one of those.
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
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