GLD ETF analysis: is this gold fund on the verge of a breakout?

GLD ETF held steady on Wednesday, close to the two-week high reached in the previous session. The range-bound trading may continue as investors seek clarity on the extension of the US-China trade truce. However, geopolitical tensions, economic uncertainties, and expectations of a Fed rate cut in September continue to support the precious metal. 

Whether the Fed decides to ease its monetary policy or hold steady, the bullion will win, based on its status as a safe haven, hedge against inflation, and a non-yielding asset. 

GLD gold ETF consolidates as market seeks clarity

On Wednesday, gold price eased slightly from the two-week high hit in the previous session. This is after a cautious improvement of the risk sentiment, with the fear & greed index shifting from a neutral level of 54 to a greed of 56. 

Nonetheless, the risk sentiment is rather wibbly and highly dependent on the prevailing macroeconomic events. Notably, the persistent geopolitical tensions and concerns over the health of the US economy have maintained gold’s attractiveness as a preferred safe haven asset.

In the ensuing sessions, GLD gold ETF may remain range-bound as market participants await clarity on whether the US will extend its trade truce with China after the current deadline of 12th August.  

In addition to these uncertainties, increasing expectations of a Fed rate cut as soon as September are set to offer additional support to gold and its derivatives. Among other drivers, the disappointing US NFP data and a downbeat US service PMI have further fueled these bets. 

Ordinarily, lower interest rates support gold price by decreasing the opportunity cost of holding the non-yielding bullion. However, the dovish move may reignite inflation. In fact, the Fed Chair has maintained that the central bank would have already begun easing its monetary policy were it not for its concerns over Trump’s tariffs and their inflationary risk. 

On the other hand, a decision by the Fed to hold steady may boost stagflation. Either way, gold wins based on its status as a conventional safe haven, hedge against inflation, and non-yielding asset.   

GLD ETF price technical analysis

GLD gold ETF has held steady above the support zone of $310 despite pulling back slightly from the previous session’s intraday high of 312. The ETF has been on a rebound after hitting a one-month low a week ago. However, it has lacked enough buyers to break the resistance at $312.50. 

A look at its daily price chart highlights a bullish signal as it trades steadily above the short-term 25-day EMA and the medium-term 50-day MA. However, an RSI of 54 hints at the continuation of range-bound trading in the near term. With that, the range between the 50-day EMA at $306 and the resistance level of $312 will be worth watching. 

There will need to be a fresh bullish catalyst for the price to break past the range’s upper limit to the upper resistance level of $315. However, the bulls remain in control for as long as the ETF remains above the psychologically crucial zone of $300.