If you've checked the spot price of silver recently, you've noticed that the price has dropped considerably this month. In fact, silver fell 74 cents on December 8th, and is now at $6.75. If you are new to the silver market, be prepared for volatility. This year, silver has dropped over 40 cents in a day several times. This is normal price action in a bull market. Silver frequently corrects to the 200 day moving average, consolidates for a couple of weeks, then heads higher.

So, why did silver correct now instead of last month? Strangely enough, I think the trigger can be found in the gold market. streetTRACKS® Gold Shares, a gold exchange traded fund (symbol GLD) began trading on November 18th. Each share sold was backed by .10 ounce of gold. After the NY market closed on December 7th, GLD dumped 15 tons of gold on the market. This created huge selling pressure, and silver began to sell off in sympathy. Eventually the silver drop began to trigger trading stops which ignited a fresh round of selling. The next morning, speculators received margin calls, and many were forced to liquidate their positions to raise cash. On December 8th, the Chicago Board of Trade increased their margins on silver up to 33% with only 24 hours notice. This drove the price down even more.

After all this liquidation, silver probably won't fall any further. It's already closed below its 200 day moving average, and has reached a strong support level. The important thing to remember is that each major correction leaves silver at a higher price than the last move down. Just last year, silver was under $5 an ounce, a level that's unthinkable today.

If you didn't buy silver then, don't despair, $6.75 is still incredibly cheap. Stock up now while prices are low.