Has Gold Recovered?

It’s nice to see gold catching some bids lately. One of the first half of 2013 theme’s seems to have been “kick the crap out of gold bulls” as it continued the downtrend started in 2011. Don’t get me wrong, it’s still in a downtrend, but the recent price action has created an interesting setup.

Since the SPDR Gold Trust ETF ($GLD)’s last attempt to rally in late-2012 the 50-day moving average (green line) has acted as a solid form of resistance. With yesterday’s move, bulls were able to get a close above the moving average and are likely now praying that it flips from resistance to support.

In April and May of this year $GLD appeared to have been trying to put in some support at $130, but eventually lost out as bears forced it to gap down taking the commodity ETF $15 lower. Well we are now back at that support level but testing it from its underbelly. Pre-market it seems we will still be below $130, I’ll be watching to see if traders can collectively fight back above and hold this level.

Turning the attention to two indicators for gold, the Relative Strength Index (RSI) and On Balance Volume. RSI had been stuck in a bearish range for the last nine months. However, with this recent bout of upward movement we can see momentum has broken back above 55. Ideally we would like to see buyers keep the RSI above 50 to insure confidence in the current upswing. The On Balance Volume indicator simply adds volume of up days and subtracts volume on down days, giving us an idea of buying and selling pressure within the ETF. The downtrend in volume is still present but could be tested within the next week or so if we see some more high volume advances.

Overall, gold appears to be looking like it’s healing some of the gaping wounds that have been created over the last couple of years. Don’t get too excited, there is still much that has to improve for $GLD to regain its uptrend, but these are good short-term signs that gold bulls need to hang on to in order for us to see further price appreciation.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.