Just a few short weeks ago, it seemed as though investors were blind to risk, but recent weakness in technology and other sectors has sparked some concern about the validity of the uptrend. During times of heightened volatility, it is common behavior for investors to flock to certain asset classes such as precious metals. In this article, we take a look at the charts of several precious metals-related assets to see how traders will look to position themselves in the weeks ahead. (For more, see: A Beginner's Guide to Precious Metals.)

SPDR Gold Shares (GLD)

When it comes to precious metals, many retail investors automatically think of gold. Historically, traders would have been required to have access to a futures account to gain exposure to gold prices, but with the invention of exchange-traded products such as the SPDR Gold Shares, it is now possible for every investor, regardless of experience, to easily open a position. As you can see from the chart below, the 50-day moving average (blue line) has recently crossed above the 200-day moving average (red line), which is commonly referred to as a golden cross. This popular buy signal is generally used by technical traders to mark the beginning of a long-term uptrend. The nearby support of the 200-day moving average and the ascending trendline are creating an ideal risk/reward setup. This means that active traders will likely maintain a bullish outlook on gold until the price triggers stop-loss orders, which will most likely be placed below the previously mentioned support levels. (For more, see: Now Is the Time to Buy Gold.)

Technical chart showing the performance of the SPDR Gold Shares (GLD) over the past year

ETFS Physical Precious Metals Basket Shares (GLTR)

While most attention when it comes to precious metals goes to gold, some active traders may want to choose to diversify their holdings more to include platinum, palladium and silver. In this case, one exchange-traded fund that is worth a closer look is the ETFS Physical Precious Metals Basket Shares. As the name suggests, this fund offers traders an opportunity to invest in a basket of physically backed precious metals such as those mentioned. Taking a look at the chart below, you'll notice that the price is currently trading within a confined trading range, which means that the easily identifiable levels of support and resistance mark entry and exit positions that will be used by many. Bullish traders may even choose to buy near current levels in anticipation of a future breakout on surging global market volatility. (For more, see: Now Is the Time to Buy Gold and Silver.)

Technical chart showing the performance of the ETFS Precious Metals Basket Shares (GLTR) over the past year

Sprott Physical Platinum and Palladium Trust (SPPP)

The rarest precious metals known as platinum and palladium are generally too expensive for retail investors to hold a physical position. However, with funds such as the Sprott Physical Platinum and Palladium Trust, there is now a cost-effective solution. And based on the chart below, there is good reason to investigate this option. Notice how the bulls have recently sent the price beyond the a clearly identified level of resistance. This bullish close puts the momentum squarely in favor of the bulls, and most will look to protect their long positions by placing stop-losses below either the 50-day or 200-day moving averages, depending on risk tolerance. It is interesting to note how the price behaved near the 200-day moving average on each of the previous pullbacks. In the case of a sudden sell-off, active traders would expect this type of strong bounce higher to happen again. (For more on this topic, check out: 4 ETFs for Trading the Surge in Commodities.)

Technical chart showing the performance of the Sprott Physical Platinum and Palladium Trust (SPPP) over the past year

The Bottom Line

Precious metals were out of favor as recently as a couple of weeks ago, but recent price action is now suggesting that this could be a group worth buying. It is particularly interesting to see how the price of the SPPP fund has closes above a key level of resistance, which could be used as a leading indicator to predict a similar move in a broad basket of precious metals such as GLTR or even specific commodities such as GLD. (For more, see: Top 3 Platinum ETFs for 2017.) 

At the time of writing, Casey Murphy did not own a position in any of the products mentioned.



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