Gold broke above recent resistance Friday with a strong move to the 1300 level (international price in USD).  That move was followed up at the start of the new week with a strong move above 1300.  The chart of GLD, the world’s largest gold trading fund, clearly shows this move – and also what it might mean.

GE GLD 1yr chart(credit Fidelity.com)

We’ve drawn a red line at the level of prior resistance.  You can clearly see the strength of the last two trading days as they break up through this level.

And looking back, we can see this level as slightly above last May’s support level.  Generally strong horizontal price supports are even across a 1-year time span – what happened here?

Well, you have to remember that ETFs slowly erode capital through fees, and also possibly through time value decay of any options and futures they may trade. As GLD is based on these instruments, it makes sense that new levels will be slightly higher than older levels.

But what’s most important about this chart is that it shows where we are possibly heading next. If gold continues on its present course, next resistance should be around 124.50 before the picture gets cloudy, adjusting for decay.  But cloudy in a good way – there’s no clear single resistance price above 124.50 until 129.

Signed,

The Gold Enthusiast


DISCLAIMER: The author holds no positions in any mentioned securities.  He is long the gold mining sector with small, non-market-moving positions in NUGT, JNUG, a few junior mining stocks, and some GDXJ call options.

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