PPR - Thoughts on Precious Metals While Watching the SLV

Published : August 2 2011 at 10:59 ET

Precious metals, gold and silver, have acted quite well in the face of a debt ceiling "agreement," but we do not find this surprising. Yet another tailwind has emerged for precious metals- fear that the U.S. credit rating will be downgraded, if not this week, then at some point in the future.

Yesterday we felt any precious metals positions that were sold on the last push above $39 toward the $40 level could be bought back at the opening on the basis that the expected pullback was baked into the cake. The fact that precious metals are rallying strongly today is some confirmation of this, but they remain volatile. The GLD is your slowest ride, while the AGQ is your fastest, and the DGP and the SLV are roughly similar.

We are keeping an eye on the SLV for a pocket pivot buy point along the 10-dma here, although at this time it would need to trade uncharacteristically high volume for the remainder of the day. Generally, the bulk of the day's trading volume in the SLV is logged earlier in the day, so sustained volume into the close that exceeds 59 million by the close with the SLV closing up above the 10-dma (currently at 38.98, roughly) would likely be a pocket pivot buy point for anyone using such a buy point as a point at which to add following the initial buy point down in the 35-36 price area.

Thus, we will be watching the SLV closely for the rest of the day, but at 7:50 AM Pacific Time, 3:50 PM London Time, there is no guarantee a pocket pivot buy point will emerge by the close.

That said, some members have elected to only pyramid their positions in precious metals based on purely price action, averaging up.

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