Trading Gold at New Highs as Stocks Sink

Gold prices are trading at new 52-week highs as stocks stumble on rising coronavirus infections. Let's take a closer look at the yellow metal.
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Gold prices have been moving higher and bulls are getting paid as the yellow metal climbs to new 52-week highs this week. 

As the stock market gyrates on increasing coronavirus cases, gold prices are hovering near 52-week highs on Wednesday. Depending on what instrument investors are looking at will determine when gold prices notched a new high.

Those looking at the futures market will view Wednesday’s session as the day the yellow metal hit annual highs, while those watching the SPDR Gold Trust ETF  (GLD) - Get Report will see that a high was hit each day this week.

No matter what instrument traders are using though, the same conclusion can be drawn from each: Gold is making a bullish move to the upside.

With the central banks around the world engaging in a near-endless amount of economic stimulus in the face of the coronavirus, it’s no wonder gold prices are on the rise.

Let’s look at the charts to see how much upside could be left.

Trading Gold

Daily chart of the GLD ETF.

Daily chart of the GLD ETF.

I’m looking at a chart of the GLD ETF, because it is the most accessible gold-related trading vehicle for investors.

Notice how the ETF initially spiked as volatility roared to life in early March. However, gold investors were caught off-guard when it started to get hammered with the rest of the stock market, falling from $158 to $138 in just a few trading sessions.

That action came as investors sold first and asked questions later. Margins calls were coming in and many investors had to sell something — a forced sale in some cases — to cover losses in other areas.

Ultimately, the GLD ETF quickly recovered its losses and pushed through $157 resistance. However, despite the various calls for higher gold prices, the metal just couldn’t get much upside traction going.

To me, it was concerning to have so many people expecting the same thing from gold. Whenever there are “too many eyes” on one trade — or a so-called slam-dunk trade — it makes me hesitant.

Still, the fundamentals supported a higher price and here we are, with shares finally breaking out of a multi-month trading range between $157 and $164.

I now want to see if gold can push up to the 138.2% extension up near $158. Above that eventually puts the 161.8% extension in play at $173.54.

On the downside, see if former resistance at $164 acts as support. If it does, bulls really are in control. Below $164 puts the 50-day moving average in play, followed by former range support near $157.