Holiday Bargains in Gold & Silver

Buying Gold and silver just got a lot cheaper. So did buying price protection, too...

HOLIDAY BARGAINS abound right now, says Brad Zigler at Hard Assets Investor. Relatively speaking, of course.

Take the gold and Silver Price, for examples. Price-conscious bullion buyers who waited a week for a sale were recently able to save $20 per ounce for the shiny yellow stuff.

Now, if you already owned metal at a higher-than-current cost basis, this sale isn't such a big deal. In fact, if you've watched the price charts, you might be feeling a little queasy right now. Year-end trading tends to be notoriously volatile. It's especially so this year as big funds close out their winning trades ahead of the Dec. 31 mark-to-market tax accounting. Gold and silver, of course, have been some of this year's big winners.

The most recent US regulator figures from the CFTC show that net speculative length in Comex Gold Futures fell 2.6% last week as four more money managers bailed from their long positions. Three funds bailed from their long silver positions and, perhaps more telling, five jumped ship to short the metal.

There's been a slowdown, too, in the money flows into the big gold and silver trusts. The Money Flow Index for the iShares Silver Trust (NYSE Arca: SLV), for example, slumped toward 50 after peaking above 80 earlier this month.

Trading ranges have also tightened up considerably over the past week – a typical prequel to bust-out moves. Note the wedge on the Silver Price chart, for instance.

Oddly though, the options market's not pricing in a spike in future volatility. The cost of puts on the biggest gold and silver trusts – the right to sell them at a pe-specified price – has in fact fallen over the past week.

Some of that, of course, is directly tied to the big funds' exit. A lot of options were used to fine-tune the risk exposure of their futures and trust holdings. Beaucoup option demand has now been sidelined.

That makes for bargains for savvy investors, though. Option premiums are cheap now, so protective hedges/long volatility positions – outright long calls or puts and long straddles/strangles, especially – can be fashioned economically. And some investors may want to consider adding options to their holiday shopping lists.

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