Raw gold briefly hit $1219 (US Dollars) during trading yesterday. This corresponds to 116 in GLD, our trading ETF equivalent. We won’t add a resistance line at 116 but you can see how yesterday’s high is right in line with the high of 5 days ago, and the level back in November just before gold took its end-of-year drop.
Looking at the chart, the last time GLD hit 116 it backed off to 114 pretty quickly, in just two days. This presents a decision for traders: Do you sell all or part of your position here, or hold on and see if GLD powers up through 116?
And of course the US Dollar is at a recent minimum, so their inverse relationship is holding pretty well.
The Gold Enthusiast will wait for the market to open and watch the action for a few minutes. If it looks like gold is heading down, he’s likely to sell just a part of his position in NUGT (the leveraged ETF which tracks the gold miners). If it looks like GLD is relatively stable or rising he’ll hold on.
In any case this is not a place to be adding to long positions in the gold sector. That would only be advisable if GLD breaks above yesterday’s high of 116.17 and UUP was dropping.
These decision points can be frustrating but if we follow good trading logic we usually make out pretty well.
Signed, The Gold Enthusiast
DISCLOSURE: At the time of writing, the author was long DGP and NUGT, and may modify position sizes of these holdings in the next 48 hours.