GLD ETF may drift sideways until September

It may be slow going for the GLD ETF until strong seasonality kicks in during the month of September 2009.  That could mean that July and August are going to be flat to sideways months for the gold price and that the real fireworks will not start until September 2009.  September is the seasonally most powerful month for gold compared to any other month of the year.

In the monthly chart above of the GLD ETF you can see that during the period late 2006 and mid 2007 the gold price traded upwards on an up sloping trendline.  But for 3 months the price of gold broke under this monthly trendline support and then just drifted sideways until September when it broke out aggressively.

That was in 2006-2007, but what about now? Now we find ourselves in somewhat of a similar situation.  We see that the July monthly price bar in the GLD has broken under trendline support.  Now whether or not it just drifts sideways for 3 months like it did in 2006-2007 remains to be seen.  It certainly seems plausible that such a scenario could repeat however.

We have broad market weakness now and slow summer months trading for July and August.  That is a ripe environment for slow sideways trading with lack of real direction.

The chart above also shows two red arrows that point to 5 monthly price bars.  I pointed those out to indicate that the head and shoulders bottom formation that began in March of 2008 is still valid.  And the 5 monthly price bars on each side represent time symmetry.  A lot of the time, but not always, you will see time symmetry on each of the shoulders of the pattern.

We could see 85 on the GLD on a pullback during the next two months and the overall structure of the head and shoulders bottom would still be intact.  Are we going to hit 85? I don’t know, but on a severe broad market correction it certainly is possible.  I just think GLD is going to be dead money for July and August (sideways type action)… so more patience is required.

So for now this is the setup we are dealing with. The gold price likes to take its sweet time before it makes any big moves.  And the GLD has been consolidating for over 1 full year and several months now.  In terms of trading, that is a LONG LONG time.