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Saturday, May 7, 2011

Silver Prices May Drop As Sell Offs Continue

Silver Prices May Drop As Sell Offs Continue ; Much of silver’s drop came as speculators pulled out of the market, CPM Group analyst Carlos Sanchez said. Silver draws a diverse group of investors. Along with gold, it is a precious metal seen as a stable asset during unsettled times and a hedge against inflation. Silver also is used in a number of consumer products; including LCD televisions, smartphones and jewelry. The combination can make silver prices more volatile because the market for the metal is smaller, resulting in greater price swings.

Sell Off

Commenting on this week’s sell-off in the silver price and silver stocks, analysts at TD Securities wrote that “the silver equities are now inexpensive relative to the silver price.” The firm’s basket of silver stocks is discounting a silver price of $32, still well below current levels. TD Securities also reiterated its 2011 and 2012 silver price forecasts of $36 and $30, respectively.
Rise In Volume

Not only has SLV seen a huge rise in volume, volatility has also been on the move. One of the simpler indicators used by traders to measure the realized volatility of a stock is the Average True Range (ATR). Over the past month we’ve seen the ATR on SLV rise from $.90 to more than $2.00. Part of this rise comes from the fact that SLV is trading at higher prices, but part also comes from the expansion of SLV’s intraday range. This increasing volatility attracts day traders as volume and volatility are what day traders thrive on. These are the traders that shun a stock if it doesn’t provide adequate liquidity or price movement. And since SLV has been providing ample quantities of both you can bet your bottom dollar it’s currently a popular spot for these intraday players.

Layers Of Money

Let’s imagine that the price of silver, or oil for that matter, is represented in layers of money. There is hedging money from producers and commercial end-users, representing the “real” fundamental participants who have set prices for commodities since futures markets were created. On top of that, we have a layer of speculative interest from bigger institutional investors and traders, from pension plans and university endowments and dedicated commodity hedge funds. Add to that a layer from smaller trade groups and funds that only dabble in commodities — a smaller amount of interest individually, but collectively their force can be as great. Finally, let’s add that last layer of purely speculative interest, from day traders and other retail investors working through commodity ETF’s ( source ; http://dailynewspulse.com/silver-prices-may-drop-as-sell-offs-continue/2223642/ ) For the latest updates PRESS CTR + D or visit Stock Market news Today

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