Monday, June 8, 2009

The Silver Lining

Within the commodity space, I've frequently highlighted gold (GLD), coal (KOL), nat gas (UNG) and oil (USO) in prior posts. Due to the resurgence in commodity stocks over the past few months, they've presented bullish opportunities aplenty. As Silver has exhibited a nice little bullish retracement pattern over the last week, I think it merits a post of its own.

The iShares Silver Trust (SLV) can be used to gain exposure in the silver space.

"The objective of the iShares Silver Trust is for the value of the shares of the iShares Silver Trust to reflect, at any given time, the price of silver owned by the iShares Silver Trust at that time, less the iShares Silver Trust's expenses and liabilities."

It seems as though the SLV does a pretty good job of tracking the price of silver as it closed today at $14.76 while silver futures were at $14.95.

Although gold has participated in the reflation trade over the last 3 months by rising around 5%, Silver has exhibited relative strength by rising 20% over the same time frame (click to enlarge).
Both GLD and SLV have exhibited bullish retracements to their rising 20 MA's over the last week. SLV has retraced to it's prior resistance point around $14.50. Both retracements are starting to look attractive.
If you're looking at actively playing commodity stocks, it would be wise to keep an eye on the greenback. Commodities and the dollar generally have an inverse relationship. Thus, a weak dollar serves as a tailwind for commodities. Conversely, a strong dollar typically serves as a headwind for commodities. For those of you that don't have a charting platform that supports currency pairs, you can use the UUP to track the price movements of the dollar. UUP is the PowerShares DB US Dollar Index Bullish- For those interested here is the overview of the UUP from MSN money:

It should come as no surprise the extreme weakness in the dollar over the past 3 months has been at least one factor helping to lift commodities.

Tyler-

4 comments:

Anonymous said...

Tyler,
I've often heard gold and commodities talked about as a conservative long term play. I've never invested in it, but what's your take on the concept that gold is a solid play because it's the "end of the world currency".

Thanks,
-Chris

Penny stock advise said...

I would like to suggest an exchange traded note that tracks the price of natural gas using futures contracts. It trades under around 5 dollars the symbol is GAZ. Natural gas is off 75% from its high in 2007.

Blogger said...

I would recommend that you stick with the ultimate Forex broker.

lauragillies said...

If you are interested in being kept informed of what is gold bullion market then please take the time to jump onto gold buyers.