• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Stay Calm and Stay Long the GLD Gold Shares ETF

The gold rally is still in early stages. The charts are saying to stay with it for the long haul.
By BRUCE KAMICH
Sep 03, 2020 | 10:23 AM EDT
Stocks quotes in this article: GLD

We have been bullish on the precious metal gold and several mining names for a long time, as regular readers of Kamich's Korner will know. In the past few weeks, I have received a number of emails from readers worrying about and second guessing the rally. They turn on their computer or tablet and they see gold going down $20, $30 or more in the morning and their hands sweat. They are nervous and are ready to jump ship.

Many years ago, probably in the mid-1990s, I remember reading an article by Robert Prechter, CMT -- a colleague and dear friend in the business. He was involved in a number of trading contests to show the power of using the Elliott Wave Principle. He traded options and produced some stunning results. His article was less about the approach researched by Ralph Nelson Elliott in the 1930s and more about how hard it is to mentally and emotionally stay with a big (and profitable) position.

In my long career in the industry, I have only met a few individuals who have successfully walked away with huge gains. While Bob has his admirers, he has also been criticized by the media and fundamentally oriented analysts. The reason I bring up this article is that it is really hard to stay with a long-term position. 

Let's look closer at the SPDR Gold Shares ETF ( GLD) . 
 
In this daily bar chart of GLD, below, we can see on this timeframe that prices turned higher in December. There was a pullback in March with the weakness in the broad market, but prices quickly resumed their uptrend. Prices accelerated into early August and have been correcting the advance over the past few weeks.
 
The nearby gold futures contract pierced the round number of $2,000 in early August and the financial media went into a mild frenzy, with many poorly written and weakly sourced stories. As a former commodities reporter for Reuters, I feel I can level that sort of criticism. 
 
 
Since missing the dot.com mania top in 1999, financial journalists are quick or too quick to label any and all steep rallies as bubbles. I lived and worked through the 1970s commodity boom and experienced first hand the rise and subsequent fall of gold and silver and sugar and coffee and many other markets. Gold prices in 2020 are a long way from being in a mania, judging by my past experiences. 
 
More charts please.  
 
In this weekly bar chart of GLD, below, we went back just three years and can see that prices have been in an uptrend from the middle of 2018 and prices are firmly above the rising 40-week moving average line. The weekly OBV line has been rising -- and tells us that buyers of GLD have been more aggressive, with heavier volume being traded in weeks when prices have closed higher. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been bullish since the beginning of 2019.  
 
 
We have also shown this long-term weekly chart of GLD, below, before. We have pointed out the large base formation and told readers that large bases can produce large gains. I believe we are in the early innings of a long-term bull market.
 
The press coverage of gold has stayed in the B section and it has largely been bearish -- the rally is irrational, it is driven by fears of inflation that are not really there, weakness in the dollar is temporary, and on and on. Holders of gold should only worry when stories about gold are very bullish and on the front page of the Wall Street Journal, above the fold.  
 
  
The Point and Figure charting methodology dates back to the 1880s in the United States and plots only defined price changes called increments, ignoring time and volume. The technique is good at identifying accumulation or buying and distribution or selling.
 
In this daily Point and Figure chart of GLD, below, we can see the rally going back to late 2016. The sideways consolidations within the uptrend allow for "counts" and price projections. This chart is projecting that prices could advance to the $297 area. I wonder how many traders will hang on for the ride?
 
 
Bottom line strategy: So what am I saying or recommending? The rally in gold is in its early innings. The media coverage is largely bearish in nature. Traders are not emailing me questions about penny stocks listed in Canada. Only one of my neighbors has asked me about gold as an investment. I feel completely safe wearing my gold neckline (but I don't commute into N.Y.C. any more). I do not (yet) get unwanted emails and Facebook and LinkedIn commercials about gold and silver. We have not elevated a few bullish analysts to guru status, which happened in the late 1970s mania. History tends to repeat itself.
 
So count slowly to 10, exhale and have an appropriate stop loss order. 
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are prohibited from trading individual securities.

TAGS: Gold | Investing | Technical Analysis | Metals & Mining

More from Investing

Fear Fades as a Reason to Rally

James "Rev Shark" DePorre
May 16, 2022 4:20 PM EDT

Monday turns uninspiring as traders lack incentive to buy and oil moves higher amid poor economic data.

You Can't Keep a Good Datadog Down

Bruce Kamich
May 16, 2022 3:48 PM EDT

A rally back to this area could unfold soon, so current investors should keep a tight leash on shares.

Occidental Petroleum Continues to Target Higher Prices

Bruce Kamich
May 16, 2022 2:52 PM EDT

Here's our first price target and our long term objective.

Supply and Demand Are Critical, but Remember: Timing Is Still Everything

Maleeha Bengali
May 16, 2022 1:51 PM EDT

Econ 101 suggests that at some point, either the supply side catches up, or demand falls to get prices back in equilibrium. Let's see what this means for oil -- and a potential recession.

How Is JetBlue's Stock Affected by Its Hostile Bid for Spirit?

Bruce Kamich
May 16, 2022 1:08 PM EDT

Let's review the charts and indicators.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:14 PM EDT PAUL PRICE

    A New, Very Scary Movie

  • 08:51 AM EDT PAUL PRICE

    Advice From the Future...

  • 12:20 PM EDT PAUL PRICE

    A Blast From the Past Regarding Bitcoin

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login