Active Traders Are Buying Precious Metals

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Active Traders Are Buying Precious Metals

Increased demand for precious metals, paired with limited supply, has pushed the group’s prices upward in recent weeks. As we shall see in the following paragraphs, close levels of support exhibited on important charts are presenting attractive purchasing chances for technical analysts. Based on these bullish patterns, we’ll attempt to predict how traders will position themselves to benefit from the rally.

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.

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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) (GDX).

Take a look at the chart below to see how the price has slowly risen from the lows in November. The consistent upward trend, paired with the bullish crossing of the long-term moving averages, implies that the bulls are in complete control. The recent price movement around key support levels shows that now might be an opportune opportunity to purchase since the risk/reward ratio is stacked in favor of a move higher. Depending on risk tolerance, stop-losses will most likely be put below $21.88 or $20.52.

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The Bottom Line

The recent rise in precious metals prices has piqued the interest of both the media and traders. Based on the patterns outlined above, it is evident that the risk-reward possibilities favor a rise higher, and local support implies that now may be an excellent opportunity to purchase.

Casey Murphy did not hold any of the assets listed at the time of writing.

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