In the commodities market, there tends to be a negative correlation between the U.S. dollar and gold and other related metals. However, despite the recent weakness in the spot price of gold futures, gold miners and the companies related to the exploration, extraction and processing of precious metals tend to be countering the trend and look poised for a move higher. In the paragraphs below, we'll examine the charts of the broad commodities market and then dive deeper into the gold miners to see how this segment could be the one to watch over the weeks or months ahead. (For more, see: Commodities Trading: An Overview.)
When it comes to tracking the commodities market, many retail investors turn to exchange-traded products such as the Invesco DB Commodity Index Tracking Fund. In case you aren't familiar, this fund comprises futures contracts on 14 of the most important and highly traded commodities. Taking a look at the chart, you can see that it is trading along a clearly defined uptrend, as shown by the ascending trendline. The bounces off of the trendline are what traders look for when gauging the strength of the support, and given the past price action, most would expect the behavior of moving higher after each attempted pullback to continue. Active traders will also use the trendline and the nearby support of the 200-day moving average (red line) when determining the placement of their stop-loss orders. Short-term target prices will likely be set around the swing high near $18.50 and then likely toward the psychological resistance level near $20. (For further reading, see: Commodities: The Portfolio Hedge.)
As discussed above, the group of gold miners seems to be moving counter to the underlying price of gold. By taking a look at the weekly chart of the VanEck Vector Gold Miners ETF, you can see that the price has trended sideways since early 2017, and recent price action suggests that traders will test the resistance near $25 in the not-too-distant future. From a risk-management perspective, stop-loss orders will likely be set below the low of $20.83. (For more, check out: 3 Charts That Suggest It's Time to Buy Commodities.)
One gold miner that will likely be of specific interest to active traders over the coming weeks will be Goldcorp. As one of the largest players in the world gold market, Goldcorp is often looked to as a barometer of the state of the broader sector. It is interesting to note how the price is trading within a triangle pattern shown by the converging trendlines and how the price recently bounced off of the support of the 200-day moving average (red line). The recent strength puts the bias in favor of the bulls, and some traders will look at the bullish crossover between the moving average convergence divergence (MACD) and its signal line as a leading indicator of a future breakout. Stop-loss orders will likely be placed below $13.40 in case of a sudden change in fundamentals or market sentiment. (For more, see: 3 Charts That Suggest It's Time to Buy Gold.)
The Bottom Line
The broad commodities market continues to look strong, and segments such as the miners of precious metals seem to be countering weakness in the underlying metal. Active traders will look at the recent tests of support as a sign of a move higher, and many will likely use the mentioned levels as guides for placing stop-loss orders and protecting against sudden sell-offs. (For more, see: Active Traders Aren't Giving Up on Gold.)
Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.