A decisive long-term breakout for gold | decision point

SPDR gold stock (GLD) hit a new all-time high this month. This was an important long-term move, and we will discuss it when we look at the monthly chart. Of more immediate interest is the fact that sentiment remains bearish, which bodes well for a continued rally. We measure sentiment based on whether the closed-end fund Sprott Physical Gold Trust (PHYS) is selling at a premium (bullish sentiment) or at a discount (bearish sentiment). PHYS is currently selling at a discount to NAV.

Weekly charts provide a better perspective on the significance of decisive breakouts. Overhead resistance has hindered GLD for more than three years and has now become support.

However, if you look at the monthly chart, you can see that the wait was much longer than three years. Gold has fallen nearly 50% since hitting an all-time high in 2011. It finally hit a new all-time high in 2020, but remained stagnant until this month. In fact, gold investors have been waiting about 13 years for this encouraging move. On the positive side, gold has built a solid high-level base around 2,000 to provide future support. Also note how the bullish sentiment (premium of approximately +14%) was displayed during the parabolic rise on the left side of the chart.

Investing in gold has several challenges to consider. Disclaimer: This is information and not a recommendation. If you purchase physical gold, you must have a safe place to store it. Safe deposit boxes can be accessed/freezed by the government, suitable safes are expensive, difficult to move and carry some vulnerabilities. Some ETFs, such as GLD, don’t actually hold physical gold. An alternative is the iShares Gold Trust (IAU), a closed-end fund that owns physical gold. Sprott Physical Gold Trust (PHYS) is a foreign entity similar to the IAU but headquartered in Canada. Consider the implications of all available options.

conclusion: Gold’s recent breakout has been a long time coming and appears to have a long-term positive impact. Additionally, our long period of consolidation has created an impressive long-term support base.

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