Conclusion, Investment Implications, Strategy

The SPDR Gold Shares (GLD) ETF appears to be making another attempt at a sustained advance from 6 months of sideways investor indecision amid expanding investor asset flows and relative outperformance versus the S&P 500 (SPX).  A sustained rise above the 166.37 area would target an additional 12% 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.”

Relative Performance

The upper panel of Chart 1 below plots GLD daily since July along with its 200-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.

Chart 1

The green highlights in the lower panel point out that, after a brief but sharp period of relative underperformance in late January, GLD is resuming its Jan 13th trend of Strategic relative outperformance versus SPY.  Meanwhile, in the upper panel, GLD has risen back above its 200-day moving average to suggest an emerging major uptrend.

The upper panel of Chart 2 below also plots GLD daily, since September 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. 

Chart 2

The green highlights in the lower panel point out that the Dec 29th trend of monthly expansion appears to be resuming following a sharp contraction from the Jan 25th peak.  Expanding investor assets are the fuel that drives a price trend.  As long as this monthly trend of expansion continues, so should recent strength in GLD.

Table 1 below shows that, considering a 190.00 upside target and a protective stop placed below the 166.37 area, a long entry price of 170.42 would provide a 1:4.8 risk/reward ratio (risking $1.00 to make $4.80) with an initial risk of 2.4%.

Table 1

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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.