Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Friday, December 15, 2006

Silver Gets Hammered By Thin Trading

This is the first day of Hanukkah. A friend of mine on the trading floor described it as "dead." Everyone's off for the holiday ... and that's why you can see something like this ...
Ouch! Silver nosedived nearly a buck an ounce. Sure, part of that was a rally in the US dollar. This morning, the greenback swooned on news that inflation is in check -- removing the risk of more Fed rate hikes. But then the greenback jumped when US Treasury data showed that international investors poured money into US securities in October. Foreign purchases of US securities (including stocks and Treasuries) rose by $82.3 billion in October, building on a $70.2 billion rise in September. That lit a fire under the US dollar.

But the dollar's rally didn't justify the 7% swoon in silver that sent the metal to a four-week low. For its part, gold fell 1.9% to a six-week low.

Copper fell to its lowest level since January. I"m glad we exited two copper stocks (with gains) in Red-Hot Asian Tigers. And while that short position we took in a copper stock in Red-Hot Resources (the trading service, not this blog) moved a little against us today thanks to renewed takeover rumors, it's under some important trendlines and is well set up for a potential pay-off next week.

Anyway, back to silver and gold. Is this a buying opportunity? We'll have to see how silver ends on Monday, but my feeling is probably yes. After all, silver stocks didn't sell off much -- the smart money has an eye on the longer term.

As for gold, while we could see more short-term weakness, the mid- to longer-term outlook for gold remains bullish. If you were waiting for an entry opportunity, it's knocking now.

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