About.com Commodities

What About Silver?

Fri, 06 Nov 2009 18:13:36 +0000

Poor silver. You never seem to hear anything about silver these days as gold is capturing all the headlines. Central banks are buying gold to hedge currency risk. Gold is the pinnacle investment for an inflation hedge as well as a safe haven investment. And lets not forget that gold has broken the psychological $1,000 barrier and keeps hitting record highs. So, what does silver have to say for itself?

There really isn't much to say about silver, except that it is riding on gold's coattails in the precious metals complex. Silver is an attractive investment for investors who like to buy the physical metal by the ounce or silver coins. Some even think silver has more leverage or upside potential than gold.

You can't help but recall that silver went up to $50 an ounce nearly 30 years ago when the Hunt brothers tried to corner the market. Trading around $17.34, silver would appear to have a lot of upside potential when you look at a long-term chart. The only problem is that it is unlikely another dynamic duo will corner the market anytime in the future.

I might be giving the impression that silver is an ugly duckling, but that is not the case. In fact, silver has outperformed gold during the last year. Silver has risen 106% off the October 2008 lows, while gold has only risen 61% from its October 2008 lows. Silver has a long way to go before it hits record highs, but I would expect silver to at least keep pace with gold as long as the rally continues.

What About Silver? originally appeared on About.com Commodities on Friday, November 6th, 2009 at 18:13:36.

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How The Fed Decision Impacts Commodities

Thu, 05 Nov 2009 17:27:38 +0000

The Fed released their decision on interest rates yesterday and it is business as usual. This means they will keep interest rates near zero for the foreseeable future, which does absolutely nothing to help the dollar. Does this mean the same theme of a lower dollar and higher commodities will resume?

I'm sure the "short the dollar and long commodities trade" will pickup once again. The markets have an enormous appetite for risk, because it is apparent that the Fed and the government will give the markets everything they want. This is a liquidity driven market because of those reasons and it will be interesting to see how far traders take it to an extreme.

That being said, there is still a top in the commodities and stock markets that should hold. We are in strange times and there is no telling what will happen. The gold market is making quite a statement trading near $1,100 an ounce. However, the commodity indexes are consolidating below their highs. The dollar will have to make a strong break lower if commodities are to make new highs.

How The Fed Decision Impacts Commodities originally appeared on About.com Commodities on Thursday, November 5th, 2009 at 17:27:38.

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Gold Futures Surges To Record High

Tue, 03 Nov 2009 18:45:21 +0000

Gold futures received a sharp boost from news that the International Monetary Fund (IMF) sold 200 metric tones to India's central bank for $6.7 billion. The news caught many investors by surprise as China was originally thought to be the eventual purchaser and many thought it would be spread over a period of time. However, it went to India and it went quickly.

Gold traders saw this as a vote of confidence for the precious metal as they pushed prices to another record high. Gold closed $31 higher at $1,085 an ounce on Tuesday. It is a positive sign for the gold market that such a large purchase could take place with gold near record highs. I have to say it is also a sign that foreign countries want to diversify out of the dollar, which might paint an ominous sign for the dollar going forward.

Gold Futures Surges To Record High originally appeared on About.com Commodities on Tuesday, November 3rd, 2009 at 18:45:21.

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Coffee Futures Setting Up For Winter Rally?

Mon, 02 Nov 2009 18:14:22 +0000

December coffee futures staged a large rally on Monday - up more than 5 percent. Coffee closed 6.45 cents higher at 142.35($1.4235 a pound). The technical picture looks very interesting in this market. It looks like coffee futures could be on the verge of a strong move higher.

A break above $146.50 would be the breakout point. Markets typically have a sharp run higher on a technical formation like this. Please remember that not all technical breakouts work and you must control your risk.

The fundamentals look positive for this market, but I can't say they suggest a rapid move higher at this point. I expect commodities to be very volatile throughout the next few weeks as the financial markets are at a critical stage right now. Technically, I would favor the upside in coffee unless there is a breakdown below the trendline - currently around $133.

Coffee Futures Setting Up For Winter Rally? originally appeared on About.com Commodities on Monday, November 2nd, 2009 at 18:14:22.

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And The Roof Caved In - Book Review

Sun, 01 Nov 2009 12:14:34 +0000

Most investors and the general public have some idea what caused the financial meltdown, but I'm guessing they are missing a great deal of the facts. I trade the markets daily and also follow the financial news closely, but the picture of the financial crisis was always a little fuzzy to me. After reading And The Roof Caved In by David Faber, I can now say it is very clear to me that greed can cause a lot of people to do a lot of stupid things.

And The Roof Caved In - Book Review originally appeared on About.com Commodities on Sunday, November 1st, 2009 at 12:14:34.

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Buckle Up For The Volatility In Commodities

Fri, 30 Oct 2009 17:37:51 +0000

The week closed out with a bang as commodities are under a strong technical reversal. Although, I have to say commodities don't look as bad as the stock markets. Gold held up fairly well, while crude oil is heading south. The dollar is gaining support and traded high by the end of the week. The gain in the dollar was not massive, but it did stop going down and that puts pressure on commodities.

I do think the markets have put in at least a short-term top, especially the stock market. I wouldn't want to be holding a short-term long position going into Monday. There were decent reversals in commodities, but the reversal in the S&P 500 was vicious. The market broke a major trendline on Wednesday. Then it retraced to the breakout on Thursday and then took out the lows on Friday. This looks very negative going into next week. A formation like this normally takes several weeks to complete, but it happened in three days!

As money comes out of stocks, it will also follow with many commodities. The odds highly favor a strong sell off next week. If the markets move sharply lower, expect to hear a lot talk about the financial problems that were swept under the rug over the last six months. It will be interesting to see if gold can hold above $1,000 or mount a rally if the stock market faces another sharp sell-off.

Buckle Up For The Volatility In Commodities originally appeared on About.com Commodities on Friday, October 30th, 2009 at 17:37:51.

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Commodities Fear The Dollar

Wed, 28 Oct 2009 17:24:17 +0000

The normal trade in the markets has changed in the last week. Most markets are reversing from the normal grind higher. The dollar is moving higher, while gold and other commodities are dropping. The stock markets are also weak right now and major trendlines have been broken.

The markets have been hyped to extreme levels and now they will be put to the test. Has reality set in that the economy might not be as strong as many analysts have been expecting? Is it time to finally pay the piper or will the government step in with even more stimulus?

I have to say the stock markets sure look like a top is in. If the top is taken out in the near term, it probably won't run much from there. Commodities are also in a precarious situation. The dollar should gain strength in the near term, which puts pressure on commodities. I can't see the dollar moving much higher in the long-term, so commodities should fare much better than stocks.

The GDP numbers for the 3rd quarter will be released Thursday. This could make for some interesting market movement. I would be defensive at this point in my trading, but a bounce should be in store by the end of the week. Gold, corn and several commodities broke trendlines. This is one of those times where investors and traders are trying to decide if this is a correction or a change in trend. Only time will tell, but I'm expecting at least a short-term change in trend.

Commodities Fear The Dollar originally appeared on About.com Commodities on Wednesday, October 28th, 2009 at 17:24:17.

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Commodities Turn Lower On Stronger Dollar

Mon, 26 Oct 2009 16:37:44 +0000

The dollar has put in at least a temporary bottom and that had traders taking profits in commodities on Monday. Gold was sharply lower, closing at $1039.80 - down $16.60. Crude oil also fell about $2, closing below the $80 level. Most other commodities were also lower, as well as the stock market.

We have seen this situation many times in the last six months. The markets look a bit inflated and we wonder how deep of a correction will we see. Most charts are showing strong reversal signals, but we have seen that several times before. You never know how deep a correction will run or whether the trend will reverse.

Short term traders should be very cautious if they are long, while long-term traders should realize that the long-term trends are higher. Tuesdays are usually turnaround days, which means there is usually a bounce after a sharply lower Monday. A sharply lower trade on Tuesday might have me thinking the correction could be a deep one.

Commodities Turn Lower On Stronger Dollar originally appeared on About.com Commodities on Monday, October 26th, 2009 at 16:37:44.

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Trading Tips For Irrational Markets

Fri, 23 Oct 2009 16:30:35 +0000

There is an old saying among traders that goes something like this...

The markets can stay irrational much longer than you can stay solvent.

There is no doubt we have seen some irrational markets in the last decade. First, we have the 1999 Internet stocks bubble, which boggles the mind. Then we have the housing market. And lets not forget the crude oil market where one ridiculous price target after another was being gobbled up by the press. Even worse, many of those prices were reached.

Looking back, it seems obvious that those markets were whipped up in a frenzy of greed and those prices couldn't possible be sustained. After going through events like these, you would think there is no way other bubble markets could be formed again in our lifetime - right?

The fact is that greed blinds many people and causes them to do irrational things. There have always been bubble markets and there always will. Just look how quickly the appetite for investor risk returned as the stock market is up 60-70 percent from its lows. This just happened to occur mere months after our economic system was on the brink of disaster. Can you spot any bubble or irrational markets right now? I wouldn't say any markets are currently in the bubble phase, but they likely will be.

Gold would be my prime candidate for eventually being a bubble market. I have to say the stock market would certainly qualify as an irrational market at this point. I believe gold prices will move much higher in the next couple years, but a target price is almost out of the question. The point I'm trying to make is that these types of irrational markets tend to move much higher than most people would expect. Therefore, it can be very costly to fight them.

Trading Tips For Irrational Markets originally appeared on About.com Commodities on Friday, October 23rd, 2009 at 16:30:35.

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Commodities Dancing To The Same Tune

Wed, 21 Oct 2009 16:33:02 +0000

Commodities continued to move higher again on Wednesday, led by crude oil and a new low in the dollar. It is the same story that just won't go away, but it is an investment reality. The once mighty U.S. dollar has fallen hard and the trade of choice is to kick it while it is down!

Selling the dollar might seem unpatriotic to some, but one can hardly question the logic of this trade. Interest rates are being kept artificially low, while the money supply and federal deficits are swelling. Even worse, the Fed and the Obama Administration are doing nothing to support the dollar.

It almost seems like the markets react the same way everyday. Commodities rise when the dollar drops and vice versa. This has been the overriding factor in determining the direction of commodity prices.

Crude oil broke above $80 today and the grain markets were sharply higher. Copper broke above the $3 mark again, but I was surprised to see the gold market basically flat on the day. The large traders might be more interested in pushing the crude oil market, since gold has had a sharp run.

Commodities Dancing To The Same Tune originally appeared on About.com Commodities on Wednesday, October 21st, 2009 at 16:33:02.

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