Digging Around Commodities After the Tumble

As we examine the fallout of Monday's commodities slide, the question of maximum pessimism in material stocks begins to rear its head. The action in gold and silver appeared to constitute margin-related liquidation, and that is often one of the first signs of maximum pessimism in a sector or asset class. If you become the buyer of last resort in an unloved asset, it's usually a path to extraordinary profits -- so I am always on the alert for signs of maximum pessimism and the extreme buying opportunities it creates.

I am of the opinion that the metals have to be getting close to that point. Silver has sunk 21% so far this year, while gold has lost 16%. Copper is often considered the most economically sensitive commodity, and it is off 10% so far for 2013. Coal prices have once again begun to retreat from the highs of December, and they appear to be headed back towards the $50-per-ton level. Iron ore prices have recovered a little, but are still well below the levels reached in 2010. Industrial metals like steel and aluminum are declining, as well, as demand falls off around the globe....614 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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