Since my last update on Gold, and more specifically on the levels of the SPDR GOLD Shares (GLD) charts (here: http://investorplace.com/2013/05/how-low-can-gold-and-silver-go/) one month ago on May 21st, the shiny metal has done just what I suspected it would. After another dead kitty bounce to still lower highs, gold is now right back where it was on May 21st and thus once again frightening the living daylights out of gold bugs the world over.
Allow me to start the laying out of the latest from my cranium – on the state of gold – through the eyes of a multi-year chart. Gold’s most recent ‘correction’ (not counting the current one) took place in 2008, when along with the sell-off in most things, it slipped lower from March until October, before then resuming its ground stomping bull-run. The bottom of this 35% correction thus serves as the lower end of the latest swing higher. Measuring the rally from the 2008 lows up to the 2011 peak, the SPDR GOLD Shares (GLD) has now retraced close to 50%, which from this time-frame indicates it is getting closer to a bottom building phase then anytime since the downward acceleration began this spring.
To be clear, I am not looking to step in front of any proverbial train here but rather would want to see better bottom building before trying at the long side of this puppy. The first and immediate support line here for SPDR GOLD Shares (GLD) is at $131, which if broken could quickly lead to $127.50 and possibly the $114/$115 area. The $115 area would correspond to the important 61.80% Fibonacci retracement level on the long-term chart above, and thus better support still.
Two more important notes on gold. First, gold as an asset, does not like economic growth, which is why often the loudest bears on equities are also bullish gold. Second, given today’s (June 19th) important FOMC statement, depending on the reaction in the fixed income and equity markets, there is significant potential for gold to make a sizable move in either direction. In other words, while gold both from the long and short term charts remains to favor further downside, a shift in the market’s paradigm does have the potential to finally put gold into a better bottom-building phase.