Wednesday, April 20, 2011

Trade Update: GLD

We went long GLD in Feb 2007 at $86.89, sold at $90.44, bought again at $91.47 and sold half of those shares at $130.50 and the other 50 shares at $132.50. We reentered long with 1/2 at $136.59 and the rest at $135.51 in February of this year. In hindsight I wish I never gotten out. Last night it closed unchanged at $145.93.

The 52 week chart illustrates clearly the stubborn resistance that $140 showed for GLD. It was repelled from there there times in November and December of last year, and then again in January and February this year. But in this month of April GLD has busted out and all that formerly stubborn resistance now provides equally firm support. The stochastics are pegged in the overbought zone, but I doubt we will ever see $140 again. If I had more money I double my position right here.

The only thing that bothers me about this ETF can't be seen on it's chart alone. It is the gap that is growing between the spot price of gold and the price of GLD. Gold closed last night at $1494.70. In a perfect world therefore GLD would have closed at $149.94. That gap is too big for comfort. I don't trust this ETF, it trustees or the exchange it trades on. I expect the gap to become a ratio soon. We don't need to argue it, just wait and see.

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