Silver and Gold Update

June 1, 2009 - Email Alert Sent 1:00 AM New York Time

          The market action in gold and silver is getting exciting. After the Memorial Day holiday, both metals had a bullish day when they tested lows but recovered to a little below opening prices. Wednesday was pretty much the opposite, with the metals pushing higher but closing just above (silver) and just below (gold) their opening prices. That type of market action sometimes precedes a sell off, so I placed stop sell orders to lock in profits in case the market turned down Thursday. Fortunately, the bulls prevailed and silver closed the next day at a new high for the year. Gold moved up just below $960, which was an important resistance level that failed in mid March. Friday, silver had another sizable gain and gold blew through the $960 level with no problem. It would be easy to get swept up in the euphoria of this strong bull rally, but there has not been a significant correction in a month and both metals are getting overbought. I'm not selling yet, but I have been placing stop sell orders and moving them up each day.

          Silver just had it's best month since 1983, moving up almost 27%. In early May, I wrote that I thought gold would be a better value than silver in the upcoming rally but silver proved me wrong. But I'm sure not complaining, since most of my trading positions are silver focused. Helped along by dollar weakness, North Korean missile tests, and the best month for commodities since 1974, the metals have posted great gains recently. There are many reasons to be bullish in the medium and long term, but there is a lot of speculative money flowing into gold and silver right now. In the past three weeks, the net commercial short position in gold has risen about 47,000 contracts, which is very similar to the increase just before the sell off that started February 23. There is now an increased risk of another sharp sell off when the latest rally fizzles out.

          I can't predict when that will happen but gold is the key. If it can hold above $980, then another run at $1000 is likely. It's hard to time these tops to the day, which is why I'm using trailing stop sell orders. Each person will need to set stop prices that makes sense based on their own circumstances, so I am not advising a specific price below spot. In general, it is good to place the stop sell price low enough so that they don't get triggered by normal volatility. I'll post another update when I get stopped out or when I think we've topped and I sell. Best wishes on your future and investing.

Best wishes on your investing and future and God Bless,

Timothy Silvers

 

Disclaimer: This article represents the opinions and personal views of Timothy Silvers and is not intended to be investment advice. If you choose to use this analysis for your personal trading, Timothy Silvers assumes no liability for the direct or indirect losses you may incur due to using this article to make your investment decisions. You are totally and completely responsible for your own investments. At any given time, Timothy Silvers or his friends and relatives may have positions in silver related investments that may or may not follow the recommendations contained in this article. The information in this article may not be completely correct and accurate. Even though Timothy Silvers has done his best to review the content and accuracy of this article, he is in no way liable or responsible for any mistakes or omissions.