Deciphering Gold's (GLD) Signals: Is Now the Time to Go Long on Gold?

The gold market saw a significant sell-off Friday morning, as unexpectedly strong job market data undermined investor hopes for imminent Federal Reserve rate cuts anytime soon. Of course, market conditions can change rapidly, and analysts' wide scattershot opinions on gold price targets in 2024 reflect this reality.

So far, the SPDR Gold Shares ETF (GLD), a proxy for the yellow metal, had a volatile run since bottoming out in October, but its uptrend remains intact. This is mainly due to its series of higher lows. But if you look at the highs, its momentum seems to have been stalling over the last three months, unable to close above its December high of $193.18. However, if you take a longer-term view, that resistance level (or "range") has held over the last four years.

Gold Prices Failing Four Times in Four Years!

CHART 1. WEEKLY CHART OF SPDR GOLD SHARES (GLD). Price has tried and failed to break above 195 over the last four years.Chart source: StockCharts.com. For educational purposes.

Analyst price targets for GLD in 2024 vary, ranging from between the low 180s to soaring past the $200 mark per share. Pinning down where it'll land is as murky as predicting the Fed's next move on slashing interest rates or forecasting when the BRICS might shake the US dollar from its global throne. But let's take a closer look at the near-term price action.

Gold (GLD) Price Today

CHART 2. DAILY CHART OF GLD. In a volatile and convoluted price environment, it helps to use volume, as well as support and resistance along with other indicators, to identify potential zones of "confluence" in a market's structure.Chart source: StockCharts.com. For educational purposes.

GLD's failure to challenge the November and December highs indicates that its uptrend may have shifted to a range-bound dynamic.

• When GLD bottomed out in October, note the significant shift from selling pressure to buying pressure on the Chaikin Money Flow.
• Peaking in mid-October, buying pressure has been steadily declining and is now in the negative, indicating that there may not be enough momentum to challenge, let alone close above, the November and December highs.

What You Should Look Out For if You're Bullish on GLD

If you're bullish on GLD, and if the pullback thesis is correct, what should you look out for?

• Note the largest bar on the Volume-by-Price indicator, which tells you that a large amount of trading occurred between $182.50 and $184.50.
• You can use this level to anticipate potential support, and you might want to set a price alert at $184.50 to alert you when the price has entered this range.
• The Volume-by-Price bar also coincides with May, June, and November resistance levels (see highest blue dotted line), the December swing low (see lower blue dotted line), and the 100-day simple moving average.
• You want the Stochastic Oscillator to get near or fall under the 20 line, signaling an oversold condition.
• Most importantly, you want to see a strong bounce upward with relatively high momentum and a CMF reading above the zero line before entering a long position.

Seasonality Warning

Seasonality is more of a contextualizing tool than a predictive tool. However, the historical consistency of the context can sometimes be predictive. If you're wondering how GLD might perform relative to the broader market, the seasonal picture gives a warning.

CHART 3. 10-YEAR SEASONAL PERFORMANCE OF GOLD VS S&P 500. For context's sake, note that GLD is entering into its weakest season months.

In short, GLD's strongest months, December and January, have passed. Look at the numbers at the bottom of the bars to see the 10-year average return of gold against the S&P 500 ($SPX). We're heading into a series of weak months, seasonally speaking. But again, this is context, not prediction. And given the volatile geopolitical situation, the conditions influencing gold prices can change on a dime.

How To Set a Technical Price Alert

Setting a technical alert at these support and resistance levels would be helpful as you weigh your potential entry points against any market developments that may influence your decision.

To access the Technical Alert Workbench, follow these steps:

• Log in to your StockCharts account.
• At the top of any page, click on Your Dashboard.
• Click the Alerts or the New button in the Your Alerts panel.
• Choose which type of alert you want to create from the Alert Type buttons at the top left. To create a price alert, select Price Alert as the alert type.
• Add GLD in the symbol box and set your price trigger.
• Choose how you wish to be notified and click the Save Alert button.

The Bottom Line

Friday's gold market nosedive, thanks to unexpectedly strong job data, dampened hopes for Fed rate cuts. Analysts have no clear consensus regarding price targets, as their predictions vary significantly. However, technical indicators can provide valuable insights in such situations. The Volume-by-Price indicator, alongside other indicators, suggests a reasonable means of locating potential support, which can be helpful to those looking to go long. However, it's crucial to consider the global context, as the monetary value and worldwide trading of gold can have long-term implications for its price.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.