Gold Futures and ETFs - GLD, DGL, GDX, IAU

Gold's (GLD) Shiny Start
Mon, Feb 24, 2020

With risk assets sharply lower this morning, investors have flocked to safe havens. Treasuries are now at or near record-low yields and gold is up well over 2%. For the Gold ETF (GLD), today's gap of 2.46% is the first gap up of 2% or more since November 9th, 2016; the day after the 2016 presidential election. Since the ETF first began trading in 2004, there have been a total of 57 days (including today and that 2016 occurrence) in which GLD has gapped up 2% or more. A little less than half (44%) of those occurrences happened during the last recession from December 2007 through June 2009. Otherwise, as shown in the chart below, these gaps have been fairly spread out without any obvious tendency to mark major tops or bottoms for the yellow metal.



Today's gap of 2.46% is just about in line with the size of past gaps up larger than 2%. As for the rest of the day, these types of large moves at the open have not led to much further buying from open to close with an average gain of only 4 bps. GLD also only rises from open to close around half of the time. As for one week later, GLD has only been higher 48.2% of the time. Granted, the size of those pullbacks have not eaten into the gap up much with an average decline of just 11 bps (median is a 9 bps decline).

 

Gold (GLD) Outshining Silver (SLV)
Mon, Mar 23, 2020

Not even precious metals have been safe from the wave of selling that has hit markets recently. While it could be expected that the massive declines in equities and big increases in liquidity would send gold or silver surging, that has not been the case. The Gold ETF (GLD) is actually down 3.61% since the S&P 500's high on 2/19. Meanwhile, silver's declines are perhaps more in line with risk assets like equities. The silver ETF (SLV) is down over 28% in that time frame. While there is that massive disparity between the two at the moment, for much of the past year SLV has been the weaker of the two metals. After both peaked in the late summer of last year, only GLD made it back up to fresh highs earlier this year. SLV, on the other hand, has cratered, reaching $12 one week ago. That is the lowest level since April of 2009.





With silver underperforming by such a wide degree, the GLD (gold) to SLV (silver) ratio has gone vertical (chart below) to levels never seen since the two ETFs have both been trading (2006). Again, gold's outperformance is nothing new as this has been the case for most of the past decade. But the degree of gold's recent outperformance has been much more dramatic.

 

Gold Bounces Right Where It Was Supposed To
Thu, Apr 23, 2020

With central banks around the world unleashing waves of liquidity, there have been heightened concerns that one result will be a decline in the purchasing power of our money. For that reason, a number of investors have been flocking to gold. Even before the COVID-19 crisis, gold prices had been in a solid uptrend, and while prices spiked as the crisis first began, they couldn't quite get above the $1,650 - $1,700 range. In mid-March even, prices plummeted with just about every other financial asset before quickly recovering. Once again, though, the rally stalled at resistance. This time around, though, the 50-day moving average was strong enough to provide support and after that test, gold finally got the long-awaited breakout that investors had been waiting for.

Gold's price spiked as high as $1,787 per ounce in mid-April before running out of momentum. When a stock or commodity breaks out above resistance to new highs and then pulls back, the former resistance level should act as support, and that is exactly what we saw this time around. This week, gold bounced right on cue at around $1,700 and has since rallied 2.6%. With the first test of support proving successful, look for gold to now establish a new range with a floor at around $1,700. At least that's what the technical analysis textbooks would say.

 

Bull Flag For Gold (GLD)
Wed, May 13, 2020

Over the past year and a half, gold has been on the up and up though it was interrupted by the string of volatility from the recent Covid crash across asset classes. In the past few months, the SPDR Gold Trust ETF (GLD) fell 12.5% from its March 9th high to March 19th low, which was followed by an 18.33% rally off that low to its last closing high on April 23rd.

Since its April high, GLD has been consolidating with a set of higher lows and lower highs between roughly $158 and $163. This is a flag pattern that suggests a breakout is coming either to the upside or the downside. For now it's closer to breaking out to the upside as it tests the top end of the flag's range.

 

Gold (GLD) Long-Term Technicals
Wed, Jul 8, 2020

The gold ETF (GLD) has gone through a nine-year drought from new all-time highs, but as it gets closer to its prior highs from September 2011, there are three possible upcoming technical set-ups. The first would be a massive multi-year "cup and handle" pattern. You can see the "cup" that has been forming over the last nine years. For the "handle" to form, GLD would need to go into a sideways consolidation phase from here for a bit. Once that consolidation phase occurs, the pattern would suggest a significant leg higher over potentially years (rather than months).

The second -- and more negative -- setup would be a bearish "double top." This would happen if GLD gets right up to its highs from September 2011 and fails to break through that resistance

Finally, the third setup would simply be a breakout higher from here. GLD could simply continue moving higher and break right through resistance at its 2011 high.

Regardless of what happens, the "cup" that has been forming for nearly a decade now is something you don't see often. It will be interesting to watch this pattern from a technical perspective over the next few months.

 

Gold (GLD) Back to Outperforming
Mon, Jul 27, 2020

As the US Dollar has fallen, gold (GLD) has continued to surge. While front-month gold futures are on pace for a seventh straight day of gains and are now at a record high, surpassing the high of $1,920.70 from September 2011, the SPDR Gold Shares (GLD) still has a bit further to go. GLD has traded around $182 this morning, which is about 1.4% away from its September 2011 highs as shown below.



As we have frequently noted recently, precious metals have been some of the strongest performing assets in 2020 even outperforming equities. In the chart below, we show the ratio of GLD to the S&P 500 (SPY). As shown, over the past decade there have only been a handful of brief periods in which gold has outperformed. That is, up until now, none of those periods have been particularly long-lasting or have resulted in a significant breakout above the past decade's downtrend line. In the initial months of the equity market rally off the March 23rd low, that outperformance of gold subsided as equities surged. But in the past several days, gold outperformance has begun to break out once again.



This recent strength comes leading up to what has historically been the stronger half of the year for the yellow metal. In the chart below, we show the average year to date performance of gold across all years since 1975. As shown, from the start of August through October has been the time of the year that gold has tended to see its largest gains. While performance has tended to subside in October, gold has picked back up in the final months of the year.

 

Street View: Let’s Talk About Gold

Gold continues to move higher and higher, making new all-time highs along the way. As we discussed in Calendar Concerns and Gold Gains, we see many fundamental reasons to expect this rally in gold to continue.

Here are the 10 reasons we listed:

• The US dollar at its lowest level in more than two years. Historically, gold and the US dollar have traded inversely. We continue to expect a lower trending US dollar as we discussed in our July 23 LPL Research blog, Dollar Weakness May Continue.
• Growing concerns over US-China relations.
• COVID-19 uncertainty and potential economic weakness.
• European data quickly improving. Europe is doing a great job containing COVID-19, thus potentially strengthening the euro—which may pressure the US dollar lower.
• Record monetary stimulus. The Federal Reserve (Fed) balance sheet exploded to $7 trillion recently, from $4 trillion before COVID-19.
• Nearly $15 billion worth of negative sovereign debt globally.
• Record trade and budget deficits.
• The Fed’s 0% interest rate policy is probably here to stay.
• Negative real interest rates (adjusted for inflation). This makes gold’s 0% interest look pretty good on a relative basis.
• Huge government spending programs may eventually spur inflation.

Something else we didn’t discuss, but is worth examining is the concept that maybe gold isn’t really at new highs. “Gold is a metal, so it doesn’t pay you any dividends; therefore, inflation can eat away at its true value over time,” explained LPL Financial Chief Market Strategist Ryan Detrick. “In fact, when you factor in inflation, the real all-time high was more than $2,700 an ounce in 1980. Gold isn’t even above the 2011 peak when considering inflation, so maybe this is another way of showing gold has room to run?”

As shown in the LPL Chart of the Day, if you adjust for inflation, gold is still well beneath the all-time high set in early 1980, and beneath the recent peak in 2011.