Buy on the pullback
The recent pullback in commodities such as gold, silver and oil really hurt the industries share prices. Gold stocks were down the most just this last week after metals prices lost more than 10%. Silver was down from its highs to 16.85 an ounce, which I believe to be the cheapest we’re going to see for a long while.
Metals have a huge amount of support and are quick to rally because of the amount of long term shorts. Banks and investing institutions have carried huge short positions mostly on silver to keep its value down. As of today, more than half the world’s yearly production is held short. If short sellers were forced to cover, it would take half a year at regular price to fill those positions. What we know about the markets though is that they don’t wait, you won’t see silver stay the same for 6 months out of the year, rather the price will move up to match demand. Short sellers have it rough at these prices.
Oil below $100 a barrel is an interesting topic however. It was interesting to see oil move so quickly from its highs in the $110s to sub $100 oil. This leads investors to think that an OPEC announcement of more production might be on the horizon because at these prices it seems like something has already been priced in.
Lower demand for oil simply won’t happen. Summer driving season and hurricane worries this fall will only push prices higher, while the currency market will add greater demand. The Iranian oil bourse to sell only in Euros is worrying for US consumers and those who buy oil with dollars.
Right now is the perfect time to buy. Economic recession here does not merit a recession abroad. China and India are growing at double digit growth rates which is sure to lock up oil demand. This minor pull back is a chance to get a position in for much lower than you’ll see this summer.