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Halftime: Fed Policy Re-Crowning the Dollar King?

Tuesday, 10 May 2011 | 2:03 PM ET

The commodities trade has been rather volatile lately. After a sell-off in silver last week, the precious metal is now rebounding. So is it time to jump back in?

To Veracruz founder Steve Cortes, the commodities trade hasn't been about industrial demand. Take Freeport-McMoRan , for example. Its stock is well down for the year and has long been trading in negative territory, he said. That suggests the commodities trade is less about industrial demand and more about bearish sentiment toward the U.S. dollar .

"The U.S. government, both on the fiscal and monetary side, is getting its house in order and the dollar is being re-crowned as the king," Cortes said, adding he's long the dollar. "It is time to wave the flag and short silver if anything."

While Cortes himself is not currently short silver, he plans to put that trade back on should the precious metal fall to the $40 level.

"I still believe in the silver trade," trader Brian Kelly countered, adding he's still long silver through both options and the iShares Silver Trust exchange-traded fund. "Inflation is not done. Both China and Brazil are raising wages and that will lead to more inflation."

The Kanundrum Capital founder thinks investors can get into the silver trade now. To play the SLV, Kelly recommends using the $33 level as your stop. For those interested in options, he suggests upside calls on the SLV, like the 40 calls.

Given global demand, author Stephen Weiss is bullish on commodities overall. Weiss likes silver as a trade, but isn't as bullish on it because he has difficulty in analyzing the precious metal.

"I don't know what industrial demand is versus investment demand versus inflation speculation," Weiss explained, adding he would rather play platinum through Stillwater Mining . To him, platnium is easier to gauge because it goes into autos, electronics and the like. "Silver, it's just not the same because it's an inflation hedge."

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POPS AND DROPS

Chart of the Day & Pops and Drops
The Fast Money traders weigh in on whether you should buy silver now and which trades you should put down today.

The "Fast Money" traders weighed in on some of Tuesday's biggest market movers.

Watch the video to see the full segment.

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Trader disclosure: On May 10, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jared Levy is short (PCLN) options. Jared Levy is short (BAX) options. Jared Levy owns (AAPL) options. Jared Levy owns (RIMM) options. Jared Levy owns (AMT) options. Jared Levy owns (SWKS) options. Levy owns (VXX) options. Jared Levy owns (EOG) options. Jared Levy is short (SPY) options. Jared Levy owns (HD) options. Jared Levy owns (IBM)options. Jared Levy owns (OIH) options. Steve Cortes owns (K), (KFT), (SO), (EXC) and (TGT). Steve Cortes is short Nasdaq Futures. Steve Cortes is short EUR vs. USD and CHF. Steve Cortes is short EEM vs. S&P long. Stephen Weiss is short (AKS). Stephen Weiss is short (X). Stephen Weiss owns (EMC), (INTC), (JPM), (MSFT), (QCOM), (VZ), (UUP), (TBT), (DE) and (SWC).

Colin Gillis
**No Disclosures

Brian Kelly
Accounts Managed By Brian Kelly Capital are long Aussie Dollar
Accounts Managed By Brian Kelly Capital are long Mexican peso
Accounts Managed By Brian Kelly Capital own (EBAY)
Accounts Managed By Brian Kelly Capital are long natural gas
Accounts Managed By Brian Kelly Capital own (SLV)
Accounts Managed By Brian Kelly Capital own (BHP)
Accounts Managed By Brian Kelly Capital own (MCP)
Accounts Managed By Brian Kelly Capital own (LYC)
Accounts Managed By Brian Kelly Capital are short U.S. Dollar
Accounts Managed By Brian Kelly Capital are short Swiss franc

Donald Yacktman
Funds Managed by Donald Yacktman owns (MSFT)

CNBC.com with wires.

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