Monday, December 14, 2009

Gold's Royal Pain

It's been a torture for long-term holders of gold and silver-related stocks (myself included). Every day gold spot price tried to move up, but as soon as the U.S. stock market opens the U.S. dollar strengthened and gold sold off much more than the dollar's appreciation. The stock market ended up for the week, but my portfolio cratered because of the large gold/silver/miner stock positions.

On Friday, maybe, just maybe, the slide may have been arrested. On a daily chart, GLD, gold-tracking ETF, stopped at $109.32, right above the 50-DMA which has acted as support since August.

Below is a weekly chart of GLD with three sets of Fibonacci retracement lines. GLD seems to have stopped at 38.2% Fib line from the most recent run-up, which is about the same as 50% Fib line from the breakout from the long-term resistance (and therefore now hopefully a good support) around $100.

One great lesson for me was that I have to remember I am trading the paper gold and silver (ETFs and ETNs), not the physical gold or silver. I could have sold all off near the top and bought back, say on Friday. Transaction costs are negligible. But I held on to them as if they were physical.

Oh well. The gold spot is currently up $8.40 at $1,123.50. We will find out soon enough whether the gain holds when the U.S. stock market opens.

No comments:

Post a Comment