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SPDR Gold Trust (ETF): Why I’m So Bullish On Gold Right Now

March 4th, 2014

india-gold-etfMoe Zulfiqar: Since the beginning of the year, one asset class has shone when compared to the stock market. I am talking about gold bullion. The yellow shiny metal’s prices are up more than 10%. The stock market, on the other hand, hasn’t performed as well. For example, year-to-date, the S&P 500 is only up by little more than one percent. With this said, I believe gold bullion can surprise investors even more this year.

Let me explain why…

Looking from a technical analysis point of view, there are a few interesting developments that suggest gold bullion prices are heading higher. Remember the first rule of technical analysis: the trend is your friend, until it’s broken. With this in mind, please look at the chart below.

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Gold - Spot Price Chart

Chart courtesy of www.StockCharts.com

The downtrend that gold bullion prices were following since late 2012 has now been broken (black line). At the same time, we see prices breaking above the 200-day moving average for the first time since early 2013 and sustaining above the 50-day moving average. This suggests sentiment is turning bullish. In addition to this, we see indicators of momentum, like the moving average convergence/divergence (MACD), suggest bulls are in control (as indicated by the black line below the chart).

The fundamentals of gold bullion prices are suggesting investors are going to reap rewards as well. The demand continues to increase and the supply remains subdued. This is the perfect recipe for higher prices.

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NYSE:GDX, NYSE:GDXJ, NYSE:GLD, NYSE:IAU


 

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