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Wednesday, February 25, 2009

Short: Gold and Silver, Just Getting Started

On Monday I wrote: Short Gold and Silver.

Yesterday Gold and Silver fell the most in six weeks...

Moving stops to the Friday's highs on any core short positions is prudent. Since this correction is just getting starting, adding on strength over the next few days is ideal. With Equities Sitting on Support, and Extremely Oversold, expect this counter trend bounce to have some follow thru. This will put significant downward pressure on precious metals.

Some of the mining stocks are ripe for some serious shorting. A couple examples can be found over at The Slope of Hope.

Gold Falls as Demand Ebbs After Rally to $1,000; Silver Drops: "Gold fell the most in six weeks as demand ebbed following a rally last week that sent the precious metal above $1,000 an ounce. Silver also declined.

Before sliding today, gold’s seven-day relative-strength index had topped 70 since Feb. 17, a signal that prices may drop in the short term. For the first time since Jan. 28, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, was unchanged for three straight sessions. The assets rose 4.4 percent last week to a record 1,029 metric tons.

“If the ETF inflows do not start again within a day or two, some traders may attempt to test the downside in gold,” John Reade, a metals strategist at UBS AG in London, said today in a note.

Gold futures for April delivery fell $25.50, or 2.6 percent, to $969.50 an ounce on the New York Mercantile Exchange’s Comex division, the biggest decline for a most-active contract since Jan. 12. Yesterday, the price dropped 0.7 percent.

The metal still has gained 9.6 percent this year. Last week, the price reached $1,007.70, the highest since March 18.

Silver futures for March delivery dropped 45.5 cents, or 3.1 percent, to $13.995 an ounce. The metal is still up 24 percent this year.

Investments in ETFs have helped drive gold and silver prices up this year. Gold and silver were the best performers in the Reuters/Jefferies CRB Index of 19 commodities this year until today."

For intraday fun with silver, there is a new ultra short ETF with the ticker ZSL that is starting to get some volume.

For overnight positions, options provide the best risk reward profile.


Anonymous said...

DGZ to short gold?