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Spiking market volatility due to concerns of a U.S-China trade war has investors scrambling to safety. One segment of the market that has received its fair share of attention in recent weeks is precious metals. Traditionally, precious metals are regarded as one of the best stores of value and are often looked to because they can act as a natural hedge to extreme volatility. In the paragraphs below, we’ll take a look at how active traders will likely look to position themselves for an anticipated move higher.
Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR)
Traders who look to gain exposure to niche market segments such as precious metals often turn to exchange-traded products such as the Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR). Taking a look at the chart below, you can see that the price of the fund has steadily moved higher since testing the support of its 200-day moving average (red line) back in May. The subsequent breaks beyond the dotted resistance clearly show that the bulls are in control of the momentum. Given the lack of previous resistance levels and the upward shift of its long-term moving averages, traders likely expect the bullish price action of the GLTR fund to continue until the end of 2019.
Aberdeen Standard Physical Palladium Shares ETF (PALL)
One of the top-performing commodities over the past 12 months is palladium. As you can see on the chart of the Aberdeen Standard Physical Palladium Shares ETF (PALL), the bulls have been in dominant control of the primary trend since the 50-day moving average crossed above the 200-day moving average back in October 2018. The long-term buy signal, shown by the blue circle, marked the beginning of a major uptrend, and traders will likely use the retracement toward the long-term support as an opportunity to add to their positions.
Active traders will also want to note the formation of a triangle pattern, as shown by the blue dotted lines. The well-defined pattern suggests that some traders will look to anticipate a move higher by placing orders near current levels and placing stop-loss orders below $130 in case of a sudden sell-off. Most importantly, a break beyond the upper trendline would likely lead traders to set their targets to $180, which is equal to the entry price above the upper trendline plus the height of the pattern.
Aberdeen Standard Physical Silver Shares ETF (SIVR)
The price of silver has experienced an extreme surge in buying interest over the past month. As you can see from the chart of the Aberdeen Standard Physical Silver Shares ETF (SIVR), the increase in demand has triggered a bullish crossover between the 50-day and 200-day moving averages. As shown on the chart of PALL, a bullish crossover between the two long-term moving averages is often used to signal the beginning of a major uptrend. Based on the chart, there are few levels of resistance standing in the way of a continued move higher. From a risk management perspective, some traders will likely want to place a stop-loss order below one of the dotted trendlines in case of a sudden shift in sentiment.
The Bottom Line
There are few areas of the financial markets that have been untouched by underlying market volatility. One segment of the commodities market that seems to have countered the trend is precious metals. Based on the charts discussed above, it seems as though there could still be significant room to the upside should geopolitical tensions continue to escalate.
At the time of writing, Casey Murphy did not hold a position in any of the securities mentioned.
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