lunes, 11 de septiembre de 2017

lunes, septiembre 11, 2017

GLD: The Declines Are Over

by: Dividend Investors
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- Geopolitical tensions and topping stock markets have generated new rallies in GLD.

- Low-interest rate environment and falling US Dollar suggest that the declines in GLD are over.

- Any short-term declines should be bought as next upside target come in at 131.20.

 
In the stock market rallies of 2017, one important asset that has been largely overlooked is the SPDR Gold Trust (GLD). The instrument is typically used as a safe haven during times of elevated political uncertainty and volatility in centralized stock benchmarks (i.e. the S&P 500 or the Dow Jones Industrials). These market elements have been missing most of the year, and because of this GLD has fallen under the radar for many investors. But as markets start to regain full strength (in terms of trading volumes), there is a strong possibility that many of these trends will change. Geopolitical tensions and topping stock valuations have led to rounds of profit-taking in equities that have already helped generate small rallies in GLD. We expect this type of activity to continue and even accelerate once sentiment builds in momentum.
 
Ultimately, this means that the post-2011 declines have completed, and the long-term bull moves in GLD are ready to begin. Our current stance is that dips should be viewed as buying opportunities, and should be taken incrementally into critical support levels through 120.60.
 
 
 
 
Gains in GLD on a year-to-date basis put the instrument higher by 12% and while this could be viewed as a relatively strong performance, we believe we are still in the early phases of a much larger move. The earliest indication that a paradigm shift is in place can be seen in the CBOE VIX index, which has developed a reputation for being a 'dead' instrument over the last year.
 
 
In the chart above, we can see that geopolitical turmoil in the month of August led to fairly substantial spikes in volatility in percentage terms. Moves in the VIX toward the 15-16 levels occurred as geopolitical tensions were reaching extremes in North Korea. There are a few aspects that are important to note here, given the fact that trading volumes were still subdued during this period and the actual events involved nothing more than hawkish jawboning between the Trump Administration and Kim Jong Un.
 
 
 
 
If we start to see North Korea resume with actual ballistic missile tests, these moves could be much more pronounced. In the chart above, we can see the number of ballistic missile tests that have been conducted by the current regime in North Korea and when we look at the rhetoric that has been used, it should be clear that there is no real evidence these clashes will be ending any time soon. If we see the headlines move beyond the 'rhetoric' phase, we can expect downside moves in the S&P 500 and upside moves in GLD.
 
 
 
 
At the monetary level, investors bullish on GLD will also need to consider the most likely trajectory of US interest rates and the effect this will likely have on the US dollar into next year.
 
At most, markets are expecting one more interest rate hike from the Federal Reserve and there is a substantial portion of the analyst community that has argued we will not even see that.
 
Lower interest rate levels make precious metals assets more attractive to investors, and without some significant changes in the language that is used by Janet Yellen and other members of the Fed we will be caught in a scenario that only pushes prices upward in GLD.
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Of course, lower interest rate levels also put downside pressure on the US Dollar. One of the most comprehensive ways to track valuations here is through the PowerShares DB US Dollar Index Bullish (UUP), which tracks the value of the greenback against a broad range of currencies. In the chart above, we can see that UUP is now trading dangerously close to very critical support levels near 24 and if this level is broken we could start seeing some major weakness in the US Dollar. Gold assets are priced in Dollars, so any significant changes here would add bullish elements to market valuations in GLD.
 
GLD Chart Analysis: Dividend Investments.com
 
 
The weekly chart in GLD is starting to look very encouraging, as prices are currently grinding through important resistance levels near 123. This area currently marks a triple top and falls in close proximity to the 61.8% Fibonacci retracement in the fall from 131.10. A clear break here will suggest that the paradigm has truly shifted and that the long-term declines in GLD are over. We will look to build long positions on any dip from here anticipating a run higher from here into the mid-130s.

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