Gold fund GLD is (again) challenging its post-2011 Down trendline.

It’s no secret that gold has had a tough decade. Yes, the metal put in a potential key bottom at the end of 2015. The prior four years, however, saw the metal nearly cut in half. Even after a 2-month approximately 20% pop in the price of gold the following the 2015 low, the metal has gone nowhere. Indeed, 16 months later gold is exactly where it was in February 2016.

From a technical perspective, the main culprit in holding prices back over the last half dozen years has been a Down trendline stemming from the 2011 highs. On a longer-term chart, particularly one that has seen such a large move in prices, we would typically prefer a log scale chart for analysis. However, a linear chart has been extremely useful in identifying key points of resistance over the last six years. For example, the trendline put an end to rallies in October 2012, July-September 2016 and in mid-April of this year.

Gold bugs have another opportunity at their hands, though, as gold is once again testing its 6-year Down trendline. Using the SPDR Gold Trust ETN, ticker, GLD, the trendline is currently just above the 121 level.

Now, breaking this trend line does not guarantee that gold is off to the races again. However, removing this 6-year old source of resistance would not be insignificant in opening up an easier path to the upside. In the GLD, we would look for immediate-term upside to the 125 level, and then to the summer 2016 highs near 130.

Of course, we don’t like to anticipate breakouts. Thus, we must assume that the trendline will hold again. If it does, the GLD it looks destined to remain, for now, in the range it’s been in for literally four years now. In that scenario, it still looks to have potential downside to the 110-112 level

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Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.