Thursday, February 22, 2007
GLD and April Gold
Here are daily charts of the gold ETF and of April gold futures. I last commented on this market here.
I think the gold market has reached a decisive juncture. If fact, I believe that yesterday's wide range up day was climactic in nature and that an extended drop is about to start. Here is why.
First, I think gold traders are overwhelming short term bullish. Secondly, gold has reached the upper part of the 550-730 trading range of the past 9 months. Third, the move up from the low of this range reached new highs yesterday and has so far lasted 8 months. Fourth, the market has entered the resistance zones I have been watching for the past few weeks.
It is this context which makes me think that yesterday's very sharp rally indicates the imminent end of the upmove instead of the start of a breakout to new bull market highs for gold. I think we shall see GLD trade below 60 over the next couple of months and eventually move much lower than that. The corresponding level for the futures is 600.