Thursday, June 2, 2011

Silver and the Double Fear Trade

In most cases, gold (and other commodities) tends to have an inverse relationship to the dollar. If the dollar is strong, it requires fewer bucks to buy the same amount of stuff. Therefore, a strong dollar leads to weakness in commodity prices.

The Double Fear trade consists of the unusual combination of rising gold prices and a strengthening dollar. ”Gold demand right now is more associated with safe-haven-type buying,” said Charles Nedoss, senior market strategist at Olympus Futures to Dow Jones newswires.

In fact, Gold is now almost back to life time highs. While, Silver continues to fall, almost every day. It seems that a deep correction in Silver is coming, but Gold is just starting its new up move. Strange are the ways of the market.


Pallavi Bhat said...

Silver was driven higher by safe haven investors but end of the day it is an industrial metal which will correct when the economy seems to be going downhill.
This should bring back the "safe haven" money from silver to gold eventually...

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