SPDR Gold Shares ETF (GLD) – Bullish Breakout to Come?


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SPDR Gold Shares ETF (GLD)

Key Statistics – Gold Shares ETF GLD


Minor Support Level 115.12 Minor Resistance Level 125.21

Major Support Level 55.05 Major Resistance Level 170.01

Minor Buy Signal 126.34 Minor Sell Signal 114.02

Major Buy Signal 173.19 Major Sell Signal 52.10


Arguably, the topic that eludes the greatest amount of emotional fervor within the investment universe is the gold market. For the past few hundred years, investors have argued about the advantages and disadvantages of owning gold in an investment portfolio. Whether you love gold or despise it, there’s no denying the fact that the “yellow metal” has stood the test of time in regard to its role as a store of value and a universally accepted method of payment.

In light of the recent explosion in the digital currency movement (i.e. bitcoin), many investors

and speculators are beginning to question the necessity of owning gold as an alternative asset. They claim gold is no longer needed as part of a diversified portfolio. Has gold finally lost its appeal within the investment community? Are all precious metals on the verge of entering a multi-year bear market? Let’s examine the details.

During the past 12 to 24 months, there has been a growing number of participants in the financial services arena who claim that investments (in general) are slowly moving to 100% digital format. These investors claim there is no need to own physical assets like gold, silver, artwork, rare coins, antiques and other such assets. Instead, they argue that digital currencies will eventually become a leading asset class which will replace “real” assets (or tangible assets).

There’s no denying the fact that gold has definitely taken a back seat to the new “digital currency revolution.” The price of gold has been locked in an incredibly boring trading range over the course of the past five years. At the same time, digital currencies like bitcoin have literally exploded in price and volume. These days, it’s not uncommon for traders and investors to buy and sell over 150,000 bitcoins per day. This represents over $1.1 billion in nominal value on a daily basis. In percentage terms, bitcoin volume has increased by over 10,000% during the past five years. The increase in trading volume has been truly spectacular.

Are we witnessing a “changing of the guard” in regard to gold being replaced by bitcoin as a new asset class for investors? Or perhaps this is simply a fad, and the gold market will come roaring back during the next financial crisis (as bitcoin and other digital currencies fall out of favor). Of course, we must wait until the next financial crisis erupts until we can determine how this scenario will unfold. For now, it certainly appears that gold may have a rather difficult time maintaining its status as a leading alternative asset.

The SPDR family of exchange traded funds (underwritten by State Street Global Advisors) introduced the Gold Shares ETF on November 18, 2004. The ticker symbol is GLD. The name of the ETF is slightly misleading. GLD does not contain any shares of gold mining companies. Instead, the ETF is focused on investing in gold bullion. Therefore, GLD is a perfect vehicle for investors who are searching for 100% exposure to the price of physical gold.


GLD has been drifting lower since mid-April. The intensity of the decline has increased during the past three weeks. The bears are in complete control of GLD. The next level of support is 115.12. In order to recapture the momentum, the bulls needs a weekly close above 125.21. The most likely scenario is a continuation of lower prices.

Based on the Aroon Oscillator, GLD has an extremely oversold reading of -72. The Aroon Oscillator is programmed differently than most stochastic indicators. The oscillator fluctuates between -100 and +100. A reading of 0 would indicate a neutral position. Therefore, a reading of -72 with GLD is considered aggressively oversold. Most likely, the ETF is very close to a short-term bottom.


Gold has been used as a medium of exchange and store of value for over 3,000 years. It is one of the very few asset classes that is universally accepted as a method of payment. Therefore, those investors and financial pundits who are forecasting the demise of gold, will probably end up looking rather foolish over the course of the next decade, as gold continues to play an important role in the global financial marketplace. However, that doesn’t mean the yellow metal is on the path to prosperity. On the contrary, there probably is some truth to the notion that gold will take a back seat to other asset classes as we move into a new financial frontier throughout the 2020s and beyond.

In regard to the long-term view of gold, the market enjoyed an incredible rally over the course of ten years (2001 through 2011). In percentage terms, gold increased 656%. However, a strong argument could be made that gold formed an important top in September 2011 @ $1,920 per ounce. Prices have been drifting sideways-to-lower for the past seven years. If the yellow metal did indeed generate a multi-year top in 2011, the market could easily remain in a bearish trend for the next decade. The downside target would be the original breakout level from November 2005 @ 502.

Of course, the “gold bugs” have a much different interpretation of the market. They claim that gold is in a secular bull market which began in September 2001. Based on their research, gold has been in a cyclical bear market since 2011. However, the multi-year secular bull market is still intact as long as the price stays above 859 on a weekly closing basis. The bullish camp believes gold will ultimately penetrate its old high from 2011, which will launch the market to its final peak in the early-2020s, well above $2,000 per ounce.

Which analysis is correct, the bulls or the bears? At least for now, it appears that the bullish argument is the best interpretation. It’s not uncommon for a commodity to experience a cyclical bear market (while still being in a secular bull market). Most likely, gold is in the seventh year of a cyclical bear market. The secular bull market is still intact as long as the price stays above 859 on a weekly closing basis. If the market does indeed penetrate 859, all bets are off, and the long-term bullish argument for gold must be thrown out the window.

Please review the 10-year chart of the gold market (Chart #1). Prices have been locked in a boring trading range for over five years. The important numbers to watch are 1046 and 1433. Currently, the market is stuck right in the middle of the 5-year range. Based on gold’s previous historical price behavior, the market will probably produce a substantial move whenever the breakout finally occurs. The breakout could go either way.


In regard to GLD, the long-term viewpoint is very similar to the gold market. The ETF has been trading sideways for the past five years. Currently, GLD is in the middle of its trading range. Therefore, the long-term view is considered neutral. In terms of the 5-year trading range, the important numbers to watch are 100.23 and 137.62.


Please review the 6-month chart of GLD (Chart #2). The short-term chart pattern is definitely bearish. GLD has been in a nasty decline for the past three months. The ETF has lost over 10% (which is considered as a rather substantial move for GLD). The next support level is 115.12. In order to reestablish the upside momentum, the bulls need a weekly close above 125.21.



Please review the 14-year chart of GLD (Chart #3). This chart covers the entire trading history of GLD. Very similar to the gold market, GLD has been locked in a trading range since 2013. The long-term chart pattern remains in neutral territory. A bullish breakout will occur @ 170.01.

GLD Long Term ETF Chart

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