Technical move in gold ETF could be short-term bullish

Gold
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GLD, the biggest gold ETF, may be signaling it hit a near-term bottom.

The SPDR Gold Shares ETF was down about 0.3 percent Monday, as gold declined. GLD at 114 is off Friday's high and close of 114.72. It's down about 2 percent this year but more than 9 percent in the past three months. Gold futures have also fallen 9 percent in the period.

Traders are betting GLD may have hit a near-term bottom after it surged on Friday.

"It broke below a prior low and broke above the highs of the week," said Scott Redler, partner at T3Live.com. "Usually an outside reversal trades below a prior low and closes above a prior high. This traded below a prior low and closed above an almost two-week high."

Redler, who follows short-term techncials, said he's long GLD but it's too early to declare a positive trend even with the bullish signal. "The downtrend has been going on for nearly two years now. It could be a counter move for traders but it still has a lot to prove," he said.

Dennis Gartman, publisher of the Gartman Letter, said he is somewhat bearish on gold in dollar terms, but he said it could be a positive that the metal had an outside reversal day Friday and also one a few days earlier.

"I think gold in dollar terms is trying to make a low, but I wouldn't bet on it," he said, adding he is bullish on it in yen terms because of the easy money policies of the Bank of Japan.

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"Recently, gold has been erratic, where you haven't had much follow through," Redler said. "Traders are trying to see if GLD will hold 113, which would be the majority of Friday's gains. If that's the case, you could follow through above 114.72."

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GLD has lost its luster as has the precious metal, but it's still a go-to vehicle for playing the gold market as it hits the 10-year mark this week.

"It was immensely popular the first eight years. I think it adds to market transparency," said Jim Steel, chief commodities analyst at HSBC. He said the waning interest in the last two years was a reflection of the drop in the price of gold. "I don't want to sound as if the ETF is not popular. There's been liquidation out of the ETF because the gold market has turned lower since the end of 2012, beginning of 2013. The movements in the ETF do reflect the market price pretty well."

GLD has plenty of rivals, like the iShares Gold Trust IAU and ETFS Physical Swiss Gold Shares, SGOL, but it has the most assets, at about $27 million as of Friday. GLD's net asset value is down 19.6 percent in the past year and its market value has fallen nearly 20 percent.