Technical Review of Gold (GLD)

Headlines citing the usual suspects are once again suggesting that gold has sustained serious technical damage. Unfortunately, the glitz and glamour of their high-profile soapboxes, though lacking consistent vision of the secular trend, is enough to break the battle lines of investment discipline for most within the community. It's simply amazing that the deflation argument, despite market observations discrediting it, remains effective. From my perspective, other than a loss of investment discipline induced by fear, I certain don’t see much technical damage to the secular trend.

The current decline, largely a paper operation (an effective one at that) to cover leveraged short positions, is nothing more than a retest of the 5/6 breakout gap. The 5/6 gap has been tested on 5/20 and 7/19 on 28 million and 15 million shares, respectively. These are big contractions in volume from the 50 million shares traded during its formation. This relative decline in volume suggests weakening downside force. Any test of this gap (or support in general) on contracting force is a bullish setup.

Paper Gold ETF (GLD):


As Dan Norcini (Trader Dan) has recently suggested, and I have rephrased it a bit for speed,

“If you tire of this horseshit do not complain, simply stand for delivery.”

Once the warehouses are drained of gold and silver, the paper illusion that redirects demand from physical to paper will be impossible to maintain.

This choice always reminds me of the famous quote by Bruce Lee in Enter the Dragon.

The enemy has only images and illusions behind which he hides his true motives. Destroy the image and you will break the enemy. - Teacher to Lee (Bruce Lee), Enter the Dragon, 1973.

Either accept what is, or do something about it.