Gold has been hammered over the past few days and the Fed isn’t helping matters. Is now the time to buy?
The S&P 500 was flat on Thursday, making some casual investors oblivious to the larger moves taking place in the market lately.
For example, gold prices have been all over the place. So have silver prices.
While the broader market hasn’t moved too much based on the action of the S&P 500, we’re seeing wide-ranging action in the Nasdaq and the Dow.
Specifically for gold and silver – and, of course, the SPDR Gold Trust ETF (GLD) – Get Report and the iShares Silver Trust ETF (SLV) – Get Report – the Fed’s discussion of interest rates has created a big dip.
The GLD has fallen for five straight sessions, while gold futures are down in four of the past five sessions, (albeit, it’s one “up” day was a gain of just 27 basis points).
Still, gold is getting hit hard on the Fed’s indications that it will look to raise interest rates by 2023. Interestingly though, gold doesn’t seem to be responding well to the current easy-money policy that will persist.
Instead, investors seem focused on what may happen in the future, even though that future is a long way off. It doesn’t help that the dollar is rallying on the news as well.
Is the dip an opportunity? After all, inflation is running hot and the Fed isn’t going to change course any time soon. Let’s look at the charts.
I am looking at a weekly chart of the GLD ETF to get a “bigger picture” idea on the metal. I also chose the GLD because it’s more widely accessible for investors – not everyone can trade futures.
In any event, the GLD faded hard from the mid-$170s, knifing right through the 10-day, 10-month and 21-week moving averages.
Gold now seems like it’s starting to catch a bid off the lows, but it’s far from out of the woods at this point. In fact, it’s very much in no man’s land at the moment.
Still, the gains in the dollar seem to be slowing as well and if we get a bounce in gold, the yellow metal could be setting up for a decent rebound.
On a rebound, bulls need to see the GLD ETF reclaim the 21-week and 10-month moving averages. If it can, that puts it into the daily gap (not that it can be seen on the weekly chart).
If shares can go on to fill that gap, it will take the GLD up to $171, around where it also finds the 50-day moving average.
Above that could put the 50-week moving average in play, followed by a smaller gap up near $175.50.
On the downside, keep an eye on the 21-month moving average. This was solid support earlier in the year, but if it fails, it opens up the $157.50 area for a potential test.