With approximately two months left in 2017, many investors are turning their attention to hard assets such as gold and copper. This shift in sentiment suggests that the markets could be nearing an inflection point, and the rising prices shown in the charts below could be a leading indicator that the smart money is moving into defensive positions. (For more, check out: 4 ETFs for Trading the Surge in Commodities.)
The rise in popularity of exchange-traded products has drastically benefited investors interested in holding a basket of physical commodities. One such fund that is rising in popularity is the iPath Bloomberg Commodity Index Total Return ETN, which comprises unleveraged investments in a wide basket consisting of gold, copper, natural gas, corn, WTI crude oil, aluminum, soybeans, silver and more. Taking a look at the chart, you can see that the recent price action has sent the price above the neckline of an inverse-head-and-shoulders pattern. The bullish price action also aligned with the crossover between the 50-day and 200-day moving averages, which is known as the golden cross. This long-term buy signal is one of the most popular and is a technical indication that we are in the early days of a long-term uptrend in commodities. (For more, see: Base Metals are Starting to Shine.)
Gold prices are catching the attention from active traders across the globe because the recent retracement, which you can see on the chart of the SPDR Gold Shares (GLD), has sent the price of the fund toward the long-term support of the 200-day moving average. This key level of support is anticipated to act as a strong floor and will likely be used by many for determine the placement of the buy and stop orders. The lucrative risk/reward setup is ideal for the gold bugs and could suggest an ideal time to buy in the event of a strong shift higher in 2018. (For more, see: 3 Positive Chart Patterns for Precious Metals.)
Copper has been one of the strongest performing commodities since Donald Trump got elected as president. Taking a look at the chart of the iPath Bloomberg Copper Subindex Total Return ETN (JJC), you can see that the focus on infrastructure spending has led to one of the strongest uptrends found anywhere, and most traders will look for this metal to continue leading the way higher. Stop-losses will likely be set below the recent breakout level, the 50-day moving average or the 200-day moving average, depending on risk tolerance. (For further reading, check out: 3 Commodity ETFs That Point to Higher Prices.)
The Bottom Line
The strong price patterns shown on the charts of the key commodity-related ETFs discussed above suggest that we are in the early days of a long-term uptrend. Gold and copper are two of the largest holdings of the DJP ETF and are likely the commodities that most active traders will expect to lead the move higher in 2018. (For more, see: Long-Term Traders Are Bullish on Commodities.)
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.