Conclusion, Investment Implications, Strategy
The SPDR Gold Shares (GLD) ETF is in the midst of an emerging major bullish trend change and a coincident emerging trend of Strategic (quarterly) relative outeprformancein versus the S&P 500. This recent strength is being fueled by a new trend of monthly asset expansion in the ETF. Together, these conditions establish a relative low-risk opportunity to buy GLD, and the physicalgold bullion it represents. A sustained rise above the 168.54 area in GLD would target an additional 11% rise to 190.00. This is an Asbury Value trade idea.
Analysis and Rationale
The SPDR Gold Shares (GLD) ETF holds gold bars and from time to time, issues Baskets in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets. According SPDR, “the investment objective of the ETF is for the Shares to reflect the performance of the price of gold bullion, less the ETF’s expenses. The Sponsor believes that, for many investors, the Shares represent a cost-effective investment in gold.”
The upper panel of Chart 1 below plots GLD daily since July along with its 20-day moving average, a widely-watched major trend proxy. The lower panel plots the daily relative performance of GLD versus the SPDR S&P 500 ETF (SPY) along with its 63-day (quarterly) moving average, the latter which identifies the Strategic trend of relative performance.
The green highlights in the lower panel point out that GLD began a new trend of Strategic relative outperformance versus SPY on Jan 13th. The upper panel shows that GLD also recently began trading above its 200-day MA to suggest an emerging major bullish trend.
The upper panel of Chart 2 below plots GLD daily since October with its 200-day MA. The lower panel plots the corresponding daily total net assets invested in GLD along with their 21-day moving averages, which identifies a Tactical trend of either expansion or contraction.
The green highlights in the lower panel point out an emerging new trend of monthly asset expansion that began on Dec 29th. Expanding investor assets are the fuel that drives a price trend.
Together, these metrics suggest an emerging new buying opportunity for gold.
Table 1 below shows that, considering a 190.00 upside target and a protective stop placed below the 166.86 area, a long entry price of 172.00 would provide a 1:3.5 risk/reward ratio (risking $1.00 to make $3.50) with an initial risk of 3.0%.
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Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.