Precious metals are often sought after during periods of heightened market volatility because of their historic nature of acting as one of few natural hedges. More specifically, global investors often look to this group within the commodities market as a store of value due to the supply and demand characteristics of the underlying metals.
As you’ll see in the charts discussed below, this segment is again looking quite strong as investors look for places to shelter capital. We’ll take a closer look at the patterns and try to determine how followers of technical analysis will likely be looking to position themselves over the weeks and months ahead.
SPDR Gold Shares (GLD)
Gold, which is the precious metal that captures most of investors’ attention, is often looked to because of its history of being regarded as a means of exchange. For traders who are interested in analyzing the price movements of the physical gold bullionthe chart of the SPDR Gold Shares (GLD) is the one that is most commonly put to the task. As you can see from the weekly chart below, the extreme market volatility in recent weeks has had a minimal impact on the price of gold.
Based on the pattern, it is clear that the bulls are in control of the long-term momentum and that most strategic traders would be looking for buying opportunities on pullbacks toward either of the dotted trendlines. The upward divergence between the long-term moving averages that has started to expand over the past several months will likely be used by traders as confirmation of a long-term moving higher. The power of the moving average and proximity of major support levels suggest that traders will place buy-stop orders above the swing high of $159.37 in anticipation of a break higher.
Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR)
Another exchange-traded product that is commonly looked to by active traders who are interested in gaining a perspective on the market direction of precious metals is the Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR). This fund includes gold, silver, platinum, and palladium bullion and offers a more diversified view than just looking at gold as in the chart discussed above. Similar to GLD, most active traders will most likely look to use a weekly chart over a medium-to long-term time horizon to get an idea of the overall trend.
In the case of the four-year weekly chart of GLTR shown below, the price has found support near the 50-week moving average and an influential trendline. The proximity to major long-term support levels and the upward divergence between the long-term moving averages suggest that the bulls are in control of the momentum and that precious metals could be in the early days of a long-term uptrend.
Newmont Corporation (NEM)
Some active traders may want to look to specific companies in the financial markets that have direct exposure to precious metals such as gold. Based on the stock chart, one of the companies that could start to appear on the radars of active traders is Newmont Corporation (NO).
The stock price of this large-cap miner has moved toward influential weekly moving averages, which have propped the price up in the past. Followers of technical analysis would expect this type of behavior to continue into the future, and many will use these key levels as a guide for determining the placement of buy and stop orders.
The Bottom Line
While most classes of investments are experiencing sharp periods of volatility, many investors are seeking places to allocate capital so that it is available to redeploy in the future. One segment that seems to be of specific interest to traders is precious metals because it has held up fairly well, and at current levels, the weekly charts suggest that prices are just starting the next leg of a major uptrend.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.