Gold prices rallied from the week’s low of $1,276.20 per ounce to the day’s high of $1,295.60 per ounce on January 27, 2015. The weaker dollar supported the gold rally. Since gold is dollar-denominated, a lower US dollar attracts gold. The gold rally reflected in the SPDR Gold Trust ETF (GLD). GLD rose to the day’s high of $125.54 from the day’s low of $122.92. Higher GLD prices led to a rally of other ETFs and stocks, like the iShares Gold Trust (IAU), the VanEck Vectors Gold Miners ETF (GDX), the VanEck Vectors Junior Gold Miners (GDXJ), and Newmont Mining (NEM).
The GLD rally ahead of the Federal Open Market Committee (or FOMC) meeting suggests that the FOMC may be patient about any changes to interest rates until mid-2015. An increase in interest rates would strengthen the US dollar and push gold and its ETF down.
High gold prices are also supported by large buying from the Netherlands and Russia. A recent report by the International Monetary Fund (or IMF) announced that the Netherlands increased their gold holdings by 9.61 tonnes to 622.08 tonnes while Russia added 20.73 tonnes to 1,208.23 tonnes in December 2015. Russia is buying gold on concerns of economic recessions. Economic uncertainty supports gold prices.
The current momentum should push the GLD ETF to its next resistance of $127, and its support is at $120. The relative strength index (or RSI) is in overbought territory. This suggests that prices could correct. However, the moving average convergence divergence (or MACD) is above the zero line, suggesting a positive price movement. The trading range in the gold chart suggests a possible consolidation in the near term.