Conclusion, Investment Implications, Strategy

The total net assets invested in the SPDR Gold Shares ETF (GLD) have shifted to a trend of monthly contraction as of Aug 20th.  As long as this trend continues, GLD — and the gold prices it represents — are likely to continnue weakening.  Moreover, we would view a decline below formidale primary  support at 176.22 to 174.07, which is currently just 2%-3% below  the market, as corroborating evidence that at least a near term top is in place at the August 6th high, and would clear the way for a much deeper decline.

GLD Failed At Long Term Resistance

Chart 1 below plots the SPDR Gold Shares ETF (GLD) weekly since 2011 along with its 52-week moving average, the latter a major trend proxy.  The red highlights show that GLD is testing, and thus far is failing at, its 185.85 January 2015 benchmark high.  This major overhead resistance.

Chart 1

The green highlights show that long term underlying support exists 3% below the market at 174.07, which is the Oct 2012 benchmark high.  The major trend in GLD has been up since February 2019, which is when the ETF rose and remained above its 52-week MA.

Chart 2 plots GLD daily since October 2019 in the upper panel along with its 50- and 200-day moving averages, the latter widely-watched minor and major trend proxies.  The lower panel plots a monthly overbought/oversold metric, a 21-day Stochastic oscillator.

Chart 2

The green highlights show that GLD has now become monthly oversold and that previous instances of this closely coincided with the resumption of the uptrend in June, March, and last November.  This metric indicates favorable conditions for GLD to resume its 2019 advance — IF the current uptrend is still healthy and intact.

Asset Flows The Key To Gold’s Next Directional Move

Chart 3 below, the most important chart in this report, suggests the uptrend is no longer healthy.  It plots GLD daily since March in the upper panel, with the daily total net assets invested in GLD plotted in the lower panel along with their 21-day moving average.  These investor assets are the necessary “trend fuel” that drives price advances. 

Chart 3

The green highlights show that monthly expansion in these assets between Mar 24th and August 19th fueled a 19% advance in GLD.  The rightmost red highlights, however, show that these assets have slipped into a new trend of monthly contraction as of August 20th.  As long as this trend of monthly contraction continues, GLD  — and the gold prices it represents — are likely to continue weakening.