It was only a matter of time before the precious metal trade got going. With silver and gold futures climbing 16% and 3% this week, respectively, the metals are getting some much-deserved attention.
While I have been bullish on the metals, the trade has admittedly been a bit slow to get going. Eventually though, these plays were bound to pick up momentum.
In the case of silver, there’s an industrial aspect to demand, while both metals benefit from the “safety haven” aspect amid rising volatility. However, it’s the coordinated stimulus action from a cohort of central banks that really drives the bullish thesis here.
With the Federal Reserve, European Central Bank and others looking to combat the coronavirus with record levels of stimulus, there's only one direction for silver and gold prices to go.
There are a plethora of ways for investors to play the metals, including physical purchases, futures trading and buying and selling stocks in the metal miners. For this case, let’s look at the metal ETFs.
Trading Gold Prices
The SPDR Gold Trust (GLD) - Get SPDR Gold Shares ETF Report has done well lately, as the weekly chart above shows seven straight weeks of gains. It’s been a slow but steady ascent in the yellow metal, with this week’s 3.1% gain so far being the largest weekly rally of this current run.
After rebounding from the March low, the GLD broke out over $158 and found this level to be support. That’s bullish price action, as shares eventually worked on a breakout over $165.
Now running higher, look to see if it can get the two-times range extension at $182.62. Above that opens up the possibility for a run to the 261.8% extension near $197.
On the downside, I want to see the 10-week moving average hold as support. It would also be encouraging to see the 161.8% extension act as support at $173.74.
Until this week, the iShares Silver Trust (SLV) - Get iShares Silver Trust Report had been lagging the SPDR Gold Trust considerably. After climbing 17% this week though, that is no longer the case as it’s up 26.6% in 2020 vs. the 22.6% gain in the GLD.
However, the SLV is getting quite extended after the latest run. Ideally, shares will maintain above the 138.2% extension at $20.30 and stay above $20. Below puts a test of the 10-week moving average in play.
Should shares continue higher, look to see if the SLV can climb toward $22. Just below at $21.91 it will find the 161.8% extension. If momentum really picks up steam, the two-times range extension could be on the table near $24.50.
Silver and gold investors both have the fundamental drivers working in their favor. The run has been nice for those that have been long, and for certain investors it would be wise to lock in some profit. However, these names can run further if momentum picks as buyers come into the market.