During times of market volatility and heightened uncertainty, active traders and investors alike often turn to market segments renowned for being safe havens such as commodities and the U.S. dollar. One group that usually gets particular attention is precious metals because of the low levels of correlation to the general market compared to other sectors. In this article, we'll take a look at several charts within the precious metals segment, particularly those that focus on gold, and try to determine how traders will likely look to position themselves over the weeks or months ahead.
Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR)
For active traders looking to gain insight on a specific segment such as precious metals, one popular method is to analyze the performance of niche exchange-traded products such as Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR). For those unaware, this fund is commonly used by traders for gauging the collective performance of commodities such as gold, silver, platinum, and palladium bullion (less the fund's expenses).
As you can see from the weekly chart below, the price of precious metals has fallen drastically and in a similar fashion to what has happened in the broader financial markets. For followers of technical analysis, the chart is of specific interest because the current price is trading near the long-term support of the 200-week moving average, which has proven to prop up prices in the past. Furthermore, it is worth noting how the nearby trendlines could also act as a level of support and lead to a buying opportunity for those willing to assume the risk.
SPDR Gold Shares (GLD)
Whenever it comes to market volatility, the one commodity that gets the most attention is gold because of its historical role as a market hedge. Taking a look at the chart of SPDR Gold Shares (GLD), you can see that the bears have sent the price of gold toward the support of the 200-day moving average. The current price is also a few percentage points away from the combined support of two influential trendlines, which could act as a guide for those looking for a position to buy. Based on this chart, traders will most likely look to buy near the 20-day moving average ($140.83) and place stop-loss order below the dotted trendlines to protect against a continued move lower.
Barrick Gold Corporation (GOLD)
As one of the largest gold mining companies in the world, no analysis of this segment is complete without looking at the chart of Barrick Gold Corporation (GOLD). As you can see below, the price has fallen below the support of the 200-day moving average but has bounced off of a key ascending trendline. Active traders will likely keep a close eye on the dotted trendline over the week ahead because it will most likely play a key role on whether or not bounces like the one from Tuesday are sustainable.
The Bottom Line
Gold and the other metals within the precious metals subsector are often looked to by active traders during times of volatility. While prices have dropped substantially over the past several weeks, nearby trendlines on long-term charts suggest that a floor could be forming and that prices could begin to rise again over the weeks ahead.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.