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« Silver Stocks: Focus and Concentrate! | Main | Hecla Mining Gains 7.98% on Friday! »
Wednesday
Mar192008

Silver, Gold and Uranium Stocks Get Clobbered!

Its difficult not to get carried away with the euphoria when the precious metals, gold and silver are at all time highs and the next stop appears to be the moon.

HUI Chart 20 March 2008

The last couple of days of trading has seen our sector of the market take it on the chin.

Gold Chart 20 March 2008

Silver chart as of 20 March 2008

We ourselves have wrestled with the possibility of trading some of our mining stocks as they were showing very good profits and on days like this it looks as though we should have done so. However this is a tricky and dangerous time for holders of mining stocks where some of them have their technical indicators tapping on the ceiling suggesting that they are overbought. On the other hand we have the slash happy Federal Reserve carving up the US dollar, which usually propels gold to higher ground. Initially the rate cut worked well as a fix for the mainstream markets with the DOW gaining 400 plus points, but the effect appears to have lasted about as long as a good bottle of wine, as today we see the DOW trading down about 293 points.

Regardless of the rate cut it would appear that profit taking has swooped in with a vengeance to take their cash to the sidelines, for now. As we write gold is down $60, silver is down $1.59 and the HUI is down 33 points. Over in the uranium corner where the metal itself has remained fairly steady with the long term price holding at $95/lb they too were sold off, for no reason we can see other than the uranium stocks being tarred with the same brush as gold and silver and therefore out you go. We have warned about this correction being in the wings, a view which is sometimes considered negative. However, we believe that it is good to have a correction from time to time in any bull market. We have also pointed out that prices had progressed a long way from their respective moving averages and that they would return at some point. Moving averages are not to be considered in isolation but you should keep an eye on them as they are indicative of aberrations from the norm. In a recent article posted on Kitco.com as of March 9th, 2008 entitled: Silver: Reached our Target, What Next? We said the following:

For the intermediate term, we see a serious correction in silver and in commodities in general across the board coming this spring. Precious metals have gone on a magnificent run recently and although we think that they will continue to do well, we must remember that nothing goes up in a straight line and this spectacular rally must end in a correction of similar magnitude.






The only certainty that we have in these uncharted waters is volatility which will feature strongly going forward. Volatility presents opportunities for traders but tends to put long term investors off their lunch as the oscillations are unpalatable. In a thinly traded market the small investor has the ability to move swiftly in and out of the market as the opportunities present themselves. However, the institutions, banks and big players cannot move so quickly without driving the price of their own holdings down in the process but maybe we are seeing a little of this today.

As regular readers will know we stopped buying in this market as we considered these price levels to be too high and we were buyers throughout the summer when mining stocks were much cheaper. We also took profits on some of our gold stocks and silver stocks recently.

We will suggest the occasional trade as go along as we have some 'opportunity cash' to reinvest when the time is right. Some of the these stocks may be hit harder than others and these are the stocks that we will look to buy. As always as soon as we think the time is right or we make a trade we will post it here so you will know what action we have taken the very minute we do it.

To stay tuned with our adventures, please sign up for our free newsletters by clicking theses links, gold, silver and uranium stocks.


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Reader Comments (2)

Hi

Would you buy physical gold and silver bullion in this recent correction?

March 20, 2008 | Unregistered Commentermumtaz

Mumtaz, Its going to be volatile for a while but we will make suggestions and trades as we go along.

March 21, 2008 | Unregistered CommenterSilver Prices

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