Is It Time To Step Back Into The Gold Market? (GLD, SLV, IAU, SGOL, GDX)

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January 4, 2012 4:49pm NYSE:GLD NYSE:SLV

Richard Rittorno: Gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV) started the first trading week of 2012 with bang. Gold sharply rose on Tuesday by 2.15% to $1,600.5; silver also followed and sharply inclined by 5.94% to reach $29.57. The January effect could be playing a role here.

The recent positive manufacturing reports out of both in the U.S. and China have helped push up the financial markets the last few days, but today’s German bond auction — seen as a failure — will put pressure on the U.S. market today.


Looking at the technical picture of the SPDR Gold Trust (NYSEARCA:GLD), traders will find that price bounced twice off the $150.77 — a double bottom — support level only to break below that level before the close.

GLD then tipped its hand on direction by gapping up and closed above the $150.77 support level the next day.  Since then, price action has been moving higher crossing the T3 Tilson  but remains below the 150-moving average.

The million-dollar question: is it time to step back into gold?

Aggressive traders can consider testing the waters here with a protective stop order below the $150.77 support level.  The more conservative can look for price action to take out the previous high of $157 and initiate a position on the pullback from the new high.

Bottom line: The fundamentals have not changed since the start of 2012. Gold is still difficult to mine and Europe still has not provided a solution to the debt crisis.  As the euro continues to be weak and Europeans face pressure to replace their currency, gold becomes that replacement. The chart seems to be painting a reversal picture.  Traders may want to take another look at gold.

Disclosure: long GLD call options.

Written By Richard Rittorno For Emerging Money

Emerging Money provides insightful and  timely information about the increasingly important world of Emerging  Market investments. CNBC Emerging Markets Contributor Tim Seymour leads  the team of Emerging Money to bring you cutting edge global news and analysis.

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