Increased demand for precious metals combined with reduced supply has sent prices of the group higher over the past several weeks. As we will discuss in the paragraphs below, nearby levels of support shown on key charts are creating lucrative buying opportunities for followers of technical analysis. Based on these bullish patterns, we'll try to identify exactly how traders will look to position themselves to profit from the run higher.
ETFS Physical Precious Metals Basket Shares (GLTR)
Precious metals are starting to capture an increasing amount of media attention mainly due to the meteoric rise in the price of palladium. In addition to general supply and demand trends, active traders will also be keeping a close eye on comments out of the Federal Open Market Committee (FOMC), the policy-making body of the Federal Reserve that is set to kick off two days of meetings. Rhetoric around shifts in interest rate policy is one of the biggest catalysts for fluctuations in the prices of precious metals due to their safe-haven-like status.
Taking a look at the chart of the ETFS Physical Precious Metals Basket Shares (GLTR), a popular exchange-traded product that is used for gaining exposure to the broad range of physical precious metals, you can see that the price is nearing the support of an ascending trendline. The recent bounce off of the 50-day moving average (blue line) and the dotted trendline suggests that the bulls are in control of the momentum and that stop-losses will likely be placed below the swing low near $64 in case of a sudden surprise sell-off.
Sprott Physical Platinum and Palladium Trust (SPPP)
As mentioned above, the sharp rise in palladium prices over the past several months has put this relatively underfollowed metal on the radar of many active traders. Those looking to gain exposure often turn to products such as the Sprott Physical Platinum and Palladium Trust (SPPP) because it represents a holding in the physical rare metals.
Taking a look at the chart, the uptrend is clearly dominant, and each successive pullback has presented traders with an ideal buying opportunity. From a risk management perspective, followers of technical analysis will likely continue to hold a bullish outlook until the price closes below one of the major levels of identified support. More specifically, depending on risk tolerance, stop-losses will likely be set below either the trendline or the 50-day moving average, which is currently trading at $10.89.
VanEck Vectors Gold Miners ETF (GDX)
Another chart relative to the precious metals market that will be closely followed by the active trading community in coming days is the VanEck Vectors Gold Miners ETF (GDX).
Taking a look at the chart below, notice how the price has steadily trended higher since notching the lows in November. The steady trend higher combined with the bullish crossover between the long-term moving averages suggests that the bulls are in clear control. The recent price action near the proximity of several support levels suggests that now could be the ideal time to buy since the risk/reward is squarely in favor of a move higher. Stop-losses will likely be placed below $21.88 or $20.52, depending on risk tolerance.
The Bottom Line
Rising prices of precious metals over the past several weeks have caught the attention of the media and traders alike. Based on the patterns discussed above, it is clear that the risk-reward scenarios are in clear favor of a move higher, and nearby support suggests that now could be the ideal time to buy.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.