This Week in Gold: Precious Metal Eyes the Federal Reserve

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Mike Hammer | October 28, 2019 10:38am NYSE:GLD

NYSE:GLD | News, Ratings, and Charts

It’s Fed Open Market week again!  Or is it Halloween, when scary creatures pop up from their graves and try to mess up your life… oh sorry, it’s both.  Somehow it seems appropriate that the Fed might be throwing rotten eggs at our portfolios in the form of an interest rate decrease.  It might seem like a good thing now – after all, free money always tastes good at first – but there’s the haunting feeling that at some point somebody just has to clean up the mess.


Gold seems to have broken out of its doldrums, at least as far as the chart is concerned. The chart of GLD, an unleveraged gold trading vehicle here in the US, shows GLD trying to make an upside break starting Thursday of last week.

gold chart october 2019
(credit Fidelity.com)

Over the weekend talking heads seemed to be tripping over their tongues, something about a pennant formation in the chart of gold. Yep, sure enough, if you draw lines and ignore a failed downside breakout – there it is.

Not much to say about this one other than the key features of a pennant is a support line below and a resistance line above converging to the right.  Of course, it means that at some point there has to be a breakout because the lines cross. And crossing lines negate at least one of the lines – never know which one until it’s too late.

But at least this time we’re spared the final suspense. GLD broke out to the upside on Thursday but retraced Friday to close right around Thursday’s high. And trading volumes weren’t very high.  Which means there’s not a lot of enthusiasm behind this breakout yet.

With more free money in the offing, it’s likely gold will not catch a bid this week from US markets. US traders will be caught up in the Fed drama, or lack thereof.  Any real price gains will have to come from overseas, and there’s plenty of turmoil out there that could pop up at any time. You know them all – Brexit, trade wars, currency wars, etc etc. Expect a sideways week unless a big geopolitical concern emerges.

Oh yeah – start watching your earnings calendar for the gold miners. We’re on the cusp of a flock of earnings reports this week and next. Those will cause individual shares to pop or collapse as their respective earnings results dictate.

Cheers,

The Gold Enthusiast

DISCLAIMER: The author has no direct position in any security mentioned in this article. The author is long the gold sector via position


The SPDR Gold Shares (GLD) was trading at $140.71 per share on Monday morning, down $1.15 (-0.81%). Year-to-date, GLD has gained 13.80%, versus a 14.22% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #1 of 33 ETFs in the Precious Metals ETFs category.


About the Author: Mike Hammer

Mike HammerFor 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.


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