Update on gold, more downside is growing more likely

As a followup to last Friday's All that Glitters post where I suggested watching the trading action in gold to gauge its future path, it is my opinion that the price of gold is likely to experience more downside from here.

Last Friday, gold fell by more than $40 while the Spider Gold Trust ETF (ticker GLD) fell $3.5 or 2.1% on 14.8 million shares. Flash forward to today, gold is trading marginally higher. However, the trading has been lackluster, as volume on the the GLD is on pace to trade less than 6 million shares. Since October 5, the GLD has experienced an expansion of volume on the downside while the MACD has gone negative.

The more that volume is light on the upside, it becomes increasingly likely that the 200-day moving average is broken. In my mind, this is being confirmed by the setup in the chart of GLD, with volume expanding on the downside from October 5 through October 24 and contracting on the counter-trend move from October 24 through November 1. I think this setup portends to a downside move on the GLD to around the $157 price point, or nearly 4% more downside. I will hold the short trading position in the GLD in the short trading portfolio and await a better buying opportunity to buy gold and precious metal stocks.