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."
POPS AND DROPS