Wednesday, April 15, 2009

A look at the ETF GLD volume

over the past 18 months demonstrates a secondary principle of markets. Price is number one when speculating and and is the only thing that matters when calculating profits and losses, but like momentum and other technical indicators, volume speaks to the conviction of a move. The "big boys" move the markets and when big institutional investors want to buy something, the price generally goes up and when they want to sell something, the price generally goes down.

A look at the ETF GLD, which tracks the price of gold and is not an investment I recommend at all for those looking to get exposure to physical gold, is revealing. This is the way many institutional investors get exposure to the gold price, which is why it is important.

The chart below is an 18 month GLD daily linear chart. Notice the difference between the 2008 spring top and what is happening now in terms of volume spike trends. The black dots show the volume spikes of interest and notice the declining volume after each spike is predominantly for days that trend in the opposite price direction. On to the chart:

This tells me that the "big money" was doing more selling than buying last spring and they are doing more buying than selling this spring. Just another piece of evidence supportive of the gold bull case...

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