Gold Bulls Rule the Day (GLD) (IAU) (SLV)

August 23, 2012 8:17 AM EDT
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It has been a long, frustrating, and emotional few months for gold bulls and investors in SPDR Gold Shares ETF (NYSE: GLD). After reaching lows of $1526 per ounce in May, gold rebounded to $1641 on rumors of Fed easing. Those hopes were trimmed later in the month following lukewarm statements from Fed Chairman Ben Bernanke. During the months that followed, gold frustrated investors by trading in a very tight, choppy range between $1550 and $1630. Finally, after months in the dregs, yesterday gold broke $1630 and accelerated to a high of $1667 overnight.

The source of the gold bull's new-found bravado is, not surprisingly, the Fed. The minutes from the FOMC meeting on August 1st, which were released yesterday, said the central bank is likely to deliver another round of stimulus "fairly soon".

The gold breakout is not without its obstacles. Bulls ran into resistance at $1670 and there are plenty of areas all the way up to $1715 where bears can make a stand. It is also important to note that the Fed's statement made it clear that easing will be highly depended upon economic data, so a string of positive data in the U.S. might jeopardize the gold rally. Comments from Fed President James Bullard on CNBC Thursday already put questions into the thesis. Bullard called the the FOMC minutes a "bit stale," and said no additional easing would be if growth holds up. That said, the bulls clearly rule the day.

iShares Gold Trust ETF (NYSE: IAU) and SPDR Gold Shares ETF (NYSE: GLD) are higher by 3 percent in the past 5 sessions. iShares Silver Trust ETF (NYSE: SLV) is higher by 6.9 percent over the same period.

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