Rising uncertainty about the future has investors across the globe concerned about growth of their investments. Many are in the process of seeking shelter from what could be another significant pullback, and traditional safe havens such as gold, related commodities, bonds and reserve currencies are gaining traction. In the paragraphs below, we'll take a look at the charts of several gold-tracking exchange-traded funds (ETFs) and try to identify why now could be the ideal time to buy.
SPDR Gold Shares (GLD)
Followers of technical analysis will often look to long-term indicators such as moving averages and trendlines to gain insight about major shifts in the underlying fundamentals. These indicators can be used to accurately reflect investor sentiment and can provide clues as to future price action.
On the chart of SPDR Gold Shares (GLD) shown below, you can see that the 50-day moving average (blue line) has crossed beyond the 200-day moving average (red line) twice over the past year. The crossover between these two moving averages is one of the most common buy signs and is often used to mark the beginning of a major trend. Recent gains have triggered a bullish crossover, which suggest that we are in the early days of a long-term uptrend. Active traders will likely look to enter a position on any form of pullback toward the moving averages to increase the risk/reward of the position. Stop-loss orders will most likely be placed below the combined support near $118.
ETFS Physical Precious Metals Basket Shares (GLTR)
Investors who want to invest in gold but who are also interested in a broader holding in the overall previous metals segment may want to consider the ETFS Physical Precious Metals Basket Shares (GLTR). More specifically, this fund is often a favorite of traders who seek to own a basket of gold, silver, platinum and palladium bullion. Taking a look at the chart, you can see the pattern looks nearly identical to the one shown on GLD above. The bullish crossover between the long-term moving averages suggests that the uptrend is just getting started. From a risk-management perspective, stop-loss orders will likely be placed below $61.11.
VanEck Vectors Gold Miners ETF (GDX)
Investors who are willing to take on risk could also be interested in the VanEck Vectors Gold Miners ETF (GDX). Of the group, this fund currently offers the most lucrative risk-to-reward ratio and has been relatively slow to adjust to rising prices of the underlying metals since the rise has occurred quite quickly. Assuming prices of the metals continue to trend higher, the group that will stand to benefit most will be the miners. Some traders may want to consider staying on the sidelines until the 50-day moving average is able to cross above the 200-day moving average, or for the price to close above the swing high of $21.54.
The Bottom Line
In recent weeks, it has become increasingly difficult for active traders to find segments of the market that look poised for growth. Growing levels of geopolitical concern have some traders seeking shelter for their investments. Based on the charts shown above, it appears as though gold and related metals could be among the top choices to consider.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.