Gold Funds

GLD, IAU, and UGL are non-leveraged funds that match the indexes. DGP is the double Bull fund for gold and DZZ and GLL are the double Bear funds. GDX is a Bull funds that tracks the gold mining stocks.

Below under “Comments, Analysis, and Recommendations”, I will write my comments for the Gold Funds giving you my chart analysis. I want to give you good evidence as to why I believe the Gold Funds are heading higher or lower. I base my analysis on several technical tools. I use Exponential Moving Averages, Elliott Wave Analysis, Fibonacci, Japanese Candlestick patterns, trend lines, and support/resistance lines.

My goal is to provide you with the information needed so you can make the best trading decisions. My goal is also to help you to become profitable and most of all to help keep you from loosing a ton of money. I will provide you the potential price targets to take profits and stop loss levels to help preserve your trading capital.

Click on the desired Gold Funds link below to view the chart.

DGP DZZ GDX GLD GLL IAU UGL

Comments, Analysis, and Recommendations

There was a very strong down day today in GLD. I have been forecasting lower prices for Gold for a while; however, the price has levitated for some time. I can speculate that this was due to the inflation camp pushing prices higher. I think that the light came on for many traders as to the fact that deflation is winning the battle, which the price action today may have indicated. Notice how the volume significantly increased with the fall today. Could this be the beginning of a change in trend? We will see, but I do not recommend betting on lower prices for gold until I “see the whites of their eyes”! I have been fooled too many times. There will be plenty of time to make money as the price declines.

Right now, the 13 EMA is above the 55 EMA and the 55 EMA is above the 233 EMA. This indicates that the long-term trend is up, even though I believe it is rolling over, we will wait before pulling the trigger. The first warning shot across the bow was the big decline today below the 13 EMA and the 55 EMA. Another warning shot was the lower lows the last couple of days. The next warning shot was the gap down at the open and a close at the lows of the session giving it a 3.44% decline today.

The price could bounce upward the next day or two; however, I do not expect the 6/28/10 high will be broken. My first target is the 104 level. Just remember that I prefer to wait for confirmation of a change in trend before jumping into the fight.

GLD declined over 2% today, while it did not form a bearish engulfment candlestick pattern with Friday’s price action, however, it engulfed Thursday’s price action! Gold has continue to defy gravity and continue to climb, however, with today’s price action, that may be about to cease.

There is an upward trend line connecting the lows starting with the 5/21/10 low and the close today is resting right on top of it. Look for further declines in the price if that trend line is broken. A break below the 6/10/10 low will also be a good sign that lower prices are coming.

GLD has had six down days out of the last seven. Gold seems relentless and pushing higher over the last couple of months. We will know very shortly if that trend will remain in place.

The 13 EMA is still above the 55 EMA, however, the price has moved inside the TAZ by breaking below the 13 EMA. This is either a great time to buy gold as it trades inside the TAZ or just a setup for a fall in price. Do look at the chart and notice the topping process surrounding the 5/12/10 high. There is also an island reversal with the opening of 5/11/10 and 5/19/10. These are not positive signs for higher prices. The price always enters the TAZ when the trend changes. The question is whether the trend is about to change or not.

Signs of weakness will be apparent when the price falls below the 55 EMA. Further weakness will be a fall below the 4/16/10 low. After that are the 3/24/10 and 2/5/10 lows. A break of the 2/5/10 low will actually put the price below the 233 EMA, which will definitely be a bearish sign.

I believe that people are buying gold as a safe haven right now along with bonds due to the world markets come unraveled. The only problem is the fact that there has been talk of signs of deflationary pressures arising in the world economies. If that is the case, do not expect gold to continue its meteoric rise in price. It will fall as the price of equities will fall, along with everything else.

Gold continues to rise as seen in the ETF GLD. GLD has come very close to breaking out into a new high. The high was 12/3/09 and if you will look closely, you will see that an island reversal occurred around that date. The current price has reached that level.

The rise up to that level has been an overlapping wave pattern as it climbed to current levels. I have to believe that the price will not break its high, even though it is as close to it as it is. Today is setting up as a bearish harmai, but we will have to wait until the close to see for sure. I expect lower highs and lows from here. A break of yesterday’s high will prove my analysis incorrect.

The price action of the Gold Funds has been very bearish over the last week. GLD had an island reversal on 3/3/10 and several bearish engulfment candlesticks. The price has closed down six out of the last seven days.

There is no clear five-wave move down so far to give us a hint that the 3/3/10 high is the end of the correction. A break below the 2/25/10 low will be a signal that the corrective process is over and lower lows are coming.

Gold could potentially fall considerably hard next week. The 3/3/10 high is the critical resistance level to watch.

Be a smart trader!

Craig Wells

The Gold Funds could not hold onto the higher prices made after the open. GLD gapped up on the open and headed higher and broke above the previous day’s high. However, it closed down for the day, which was below the previous day’s close and near the sessions low as well. This does not bode well for higher prices.

The price action on 3/3/10 formed an island reversal, which is a bearish pattern. Could the Gold Funds be ready to start its next move to lower lows? Fist, the 3/3/10 high must hold off any attempt at higher prices. Second, a drop below the 3/1/10 low will be the first hint that the next leg down has started. A break below the 2/25/10 low will be a stronger hint and a clear five-wave decline from the 3/3/10 high will be the strongest.

Be a smart trader!

Craig Wells

The Gold Funds have been no different from the rest of the funds I follow. The bounce has been a little stronger than I had expected. GLD made the 76.4% Fibonacci retracement level just as everything else have. The Gold Funds should turn down soon if my Elliott Wave count is correct. The price cannot break the 1/11/10 high, or I will have to re-evaluate the charts and reconsider the direction for the gold price.

The first sign that the next leg down is underway will be the 2/25/10 low. A clear five-wave move down will be better. With the distance between the current price and the 2/25/10 low, we very well could see a five-wave pattern before a price break below the 2/25/10 low.

If I expect lower prices for gold and with the retracement seen in GLD, then the price must start its next leg down soon. The corrective pattern potentially could be complete with today’s price action. We will know something in the next day or two.

Be a smart trader!

Craig Wells

The Gold Funds look poised to head lower, below the 2/5/10 low. The price closed below the trend line mentioned last night. I can also count an Elliott Wave five waves down, which indicates the potential for the next leg down is underway. If this is the case, the price cannot cross above the 2/19/10 high.

The price gapped down on the open and tried to muster up a rally. It failed and closed near the lows of the day. I would not be surprised if there is a little bounce tomorrow before the downtrend resumes in earnest. There is an unfilled gap from the 2/23/10 open, which could draw the price.

Be a smart trader!

Craig Wells

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