Trading GLD: What’s Ahead

06/21/2010 10:54 am EST

Focus: ETFS

Gold is shaping up for a parabolic move into new all-time highs. US gold futures closed just under previous all-time intraday highs of $1,253.90 for the highest all-time closing price. I am locked and loaded long GLD with an average price of $119.38 and a stop at the $118.80 area. I expect this to be an excellent swing trade as momentum will likely increase dramatically when gold clears previous highs. I will be looking for at least $1,300 to start taking profits. When momentum kicks in, gold has a historical tendency to take off with the excitement.


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But, gold is a widowmaker and makes quick work of those who chase. I learned a tough lesson in December 2009 while suffering through a dramatic drop with too much size. I had worked into the position very early and had a great average price around of around $97. But I did not take profits quickly enough and underestimated the level of pain that a pull in would put me through. I sold a quarter of my position at $112 and got lucky to sell another quarter just near the top at $118.50, but I held almost half my position as gold dropped over $150 from the highs. I learned to never underestimate how tough it is to watch a lot of P and L evaporate before your eyes. So this time around, I'll try to be very quick to exit when the bid disappears. Let's hope I recognize when that happens and accept the missed profits of not selling at the top. Let the games begin!

By Brandon Rowley of T3Live.com