Conclusion, Investment Implications, Strategy

Recent strength in the SPDR Gold Shares (GLD) ETF has positioned it at a major decision point, both outright and relative to the benchmark S&P 500.  Recently expanding investor asset flows are fuel for more strength, and a sustained rise above the 173.88 area would confirm a new major bullish trend change in GLD and in the gold prices it represents.

Analysis and Rationale

In our Apr 21st Special Report entitled Gold ETF (GLD) Bottoming? we pointed out that the SPDR Gold Shares (GLD) ETF had recently made a minor bullish trend change amid expanding investor asset flows, and that this indicated a new Tactical buying opportunity.  That trading idea is still intact and continues to appear in our Asbury Stock & ETF Ideas. 

Chart 1 below, an updated version of the one from that report, plots GLD daily since January along with its 200- and 50-day moving averages, widely-watched major and minor trend proxies.  The lower panel plots the daily total net assets invested in GLD along with their 21-day (monthly, our Tactical time frame), moving average. 

Chart 1

The green highlights between both panels show that these total net assets have remained above their 21-day MA, indicating a trend of monthly expansion characteristic of sustainable price advances, and have continued to expand since then.  The chart also shows that GLD’s 3.4% rally since our Apr 21st report has resulted in a test of the 200-day moving average, a widely-watched major trend proxy currently situated at 173.88.  A sustained rise above the 173.88 area would indicate an emerging major bullish trend change, reversing the major bearish trend that was initiated in early February.  Minor underlying support exists at 163.76, the current location of the 50-day MA (minor trend proxy).

Chart 2 below plots GLD daily since November along with its 200-day MA.  A corresponding chart of the daily relative performance of GLD versus the benchmark S&P 500 ETF (SPY), along with its 63-day (quarterly, our Strategic time frame) MA, appears in the lower panel.  GLD has outperformed SPY by 2.9% since Apr 21st.

Chart 2

The red highlights show that, while GLD tests it 200-day moving average as major overhead resistance (upper panel), GLD is also testing its Strategic trend of relative underperformance versus SPY.  This trend has been in existence since August 2020. 

This is a major decision point for GLD and the gold prices it represents, from both an outright and relative basis versus the US broad market.  A sustained rise above 173.88 in GLD amid a continued expansion in investor assets (as shown in the lower panel of Chart 1 above) accompanied by a new trend of Strategic relative outperformance by GLD versus SPY, would clear the way for much more outright and relative strength by gold prices in the weeks and months ahead.