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Strong Support Raises SPDR Gold Trust (ETF) (NYSEARCA:GLD) Higher

Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) falls
SPDR Gold Trust (ETF) was up by more than 1 percent on today’s market as gold refuses to sink much further in a rocky market. The price of spot gold headed toward $1,100 on Monday and hit its highest level since the end of June. Bulls appear to be buying in, and discounting the bear thesis for the time being.
SPDR Gold Trust ETF (GLD) Price target
That bear thesis held that the price of the yellow metal was due for a long hard fall in the months ahead. The lowest price target from a respected voice was $350. Major Wall Street banks were calling for the price of an ounce of gold to fall below $800. Despite those bearish numbers, gold stayed steady below $1,100. That doesn’t mean the worst is over, however.

Gold spikes on Monday morning

The gold spike on Monday morning was notable because of forecasts that the Federal Reserve is likely to raise its base interest rate next week. The coming rate rise has been blamed for crashing gold prices in recent weeks, but as it inches closer the gold market doesn’t seem to be taking an outsized hit.

Ole Hansen of Saxo Bank said that this morning’s rise was down to some traders covering their gold shorts. “We have been rangebound since the collapse on July 20, with many recently established short positions not performing at these levels,” he said on Monday.

Many on Wall Street were not convinced that this morning’s action was going to form a trend. “Gold prices just need a new acceleration point. We still expect the interest rates in the U.S., and the dollar,” to do that, said Georgette Boele of ABN Amro.

The SPDR Gold Trust (ETF) was, as it’s designed to, following the spike in the price of spot gold on Monday morning.

SPDR Gold Trust (ETF) (NYSEARCA:GLD) jumps

Today’s spike in the gold market doesn’t have an obvious force behind it. At time of writing the SPDR Gold Trust (ETF) was trading for $106.04, up 1.33 percent for the day’s trading so far. Over the last three months the ETF, which is supposed to reflect the price of gold, has lost close to 7 percent of its value. 

That’s nowhere near what more creative ETFs tracking gold have lost in recent months. That doesn’t matter, however. The SPDR Gold Trust (ETF) is bought by many investors looking for stability, protections from rock markets and inflation.

What those investors have been handed in recent months is a very volatile market that is quickly eroding whatever money they’ve put behind it. The $350 price target, which came from Claude Erb, was based on an overreaction as traders that use gold for safety get out of the metal in order to keep their savings safe.

This morning’s price rise may be seen as a bull flag, and evidence of a bottom in the market, but with the Federal Reserve decision ahead, and many other catalysts in the market, there’s no such thing as a safe bet.

All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
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