Friends
Talk about letting the air out of a bubble. Oil dropped $10 per barrel today to end the day around $99 per barrel. We were looking at $115 just a week or so ago. And how about silver, down almost $5 today to just over $34 per ounce. Last week we were looking at the $50 level. And just for good measure, gold dropped about $45 dollars per ounce to close around the $1470 area. An amazing change in sentiment in just a few days. The reasons are many but the raising of margin requirements for silver began to panic leveraged traders.
The continuing “lower dollar/higher commodity” trade has been rudely interrupted, and guess what, the dollar actually went up today. I know it is only been a couple of days but a 30% drop in silver might change a few investors’ perceptions of risk. Those who bought last week at $49 are feeling the pain today. We’ll keep an eye on this trade, but after some time in this business it is good to know we can identify a bubble when we see one. Having said that, we are not necessarily negative on gold or even silver, we were just concerned about the parabolic move seen in some of these commodities.
Stocks got caught up in the risk-off trade also, with the Dow dropping 139 points. It didn’t help that the first time unemployment claims number was much higher than expected this morning, piling on another disappointing economic number to the ones we have seen over the past few weeks. We’ll see what the unemployment picture looks like in the morning when the monthly employment numbers are released.
We’ll check in with you in the morning. Have a nice evening everyone.
