Silver Wheaton has had a pretty strong pullback right into support over the last few days. I was fortunate enough to sell some of my position, and write calls against my position above $10.50. I have been an advocate of the stock in the past, riding it from its lows to the recent highs. I still continue to like this company. I like the long term fundamentals of precious metals, and in particular silver more than gold.

Today spot gold traded below $920, which has been decent support over the last week, but when GLD tried to break through 90 on the downside, it quickly reversed and took out the morning highs. I really like SLW in front of this $7.50 level. Gold is still in a bull market, and the longer we can consolidate above $900, the more explosive the move will be to the upside.

I’m playing this two ways:  Buying the stock outright, and selling put spreads.  Most recently I sold $10 September puts and bought $7.50 puts, and expect to make the spread in them in the coming months.

Gold has been steadily climbing the last few weeks.  Some fundamental reasons for its climb has been growing concerns over inflation, growing concerns over deflation, concerns on the the ability for the Euro to act as a reserve currency, and concerns over possible US bank failures.

The weekly chart, posted below looks very good.  It has formed a massive bull flag over the last year or so, which is good news for the bulls.  I think fundamentally gold is strong.  Gold in terms of US dollars has actually been lagging all over currencies.  Gold has broken to new highs against almost every other currency in the world.

Some points of interest to me are not just the $1030 high, but also the $990, where it failed last Summer.  On pullbacks I would expect gold to hold above $930 to prove real strength, and $890 a little lower, although I would prefer it not violate the higher level.

One interesting point to note:  large gold miners such as ABX, AEM, GG, and NEM have not followed the commodity into this last upmove to the 980 level.  This could be telling us that a meaningful pullback could be in store for gold futures.  Nonetheless I will be looking to buy into weakness instead of shorting into strength.  We could be witnessing the beginning of a multi-year bull run.

Weekly Chart