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The following article was published in our article directory on April 18, 2013.
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What Simply Happened To Silver Rates

Article Category: Finances

Author Name: Dr. Jeffrey Lewis

Both gold and silver experienced historical sell offs throughout the last couple of trading sessions.

Comments and analyst viewpoint have been varied, yet very few outside of the precious metals community have come close to discriminating the truth of this giant .

Without a working knowledge of price discovery, many will fail to grasp the meaning of what just happened.

For beginners, the secret is to always focus on the origin of this step. Where and how the selling stemmed is exactly what matters . Outside market forces and technical indicators may seem to fit, however all markets have actually diverged from anything resembling a natural trading framework.

Right here is exactly what happened:

In the , the typical dominant traders made up of a couple of entities who preserve exaggerated and naked short positions, dropped a substantial selling bomb into the CME pits last Friday. This got the ball rolling and the price went down with substantial volume. Consequently, prices have actually now through every core moving average.

The most recent is an outcome of panic selling and follow up liquidation caused by margin calls.

As many gold and silver investors know, these moves are initiated by means of electronic or high-frequency trading and have nothing to do with genuine supply and demand. In fact, this type of trading has actually controlled every market and by some accounts is responsible for upwards of 70% of all trading activity, consisting of equities.

Open interest in silver was at record degrees for an extraordinary period of time. This was uncommon since it took place throughout a time where silver had actually been "" or trading heavily. Normally, open interest falls with as speculators sell positions.

Things really ripened with the entrance hedge funds. These speculators had actually become the market in waves over the last couple of weeks for the first time in 7 years in silver and longer for gold.

Typically, any hedge funds pile in on as the last to arrive and the first to bolt and cover positions.

As very long time silver analyst Ted Butler pointed out on Monday, this likely enabled the big silver shorts to cover the bulk, if not all their trapped position. Certainly it is immoral and illegal to make use of positions like this to affect rate, but if this is indeed the case then we've just cleansed the market of this extremely uneconomic position and things could now be established for an equal move up. (We will understand when the following COT report comes out).

The entire remarkable move could be about that and nothing else. Undoubtedly, this has to do with as far from how natural markets work as one could go.

The mainstream monetary press stays focused on the Goldman Sachs's current call for gold in the 1200's and the Cypriot "gold-selling rumor" as a design template for additional gold liquidation from the rest of the EU periphery as the drivers for this sell-off.

Goldman Sachs is well-known for talking their book their clients to do exactly what they desire.

Regarding the Cyprus reasoning, it would be rather a stretch to presume that any of that gold would reach the market, given the demonstrated record purchasing of the establishing world's central banks who frantically construct reserves of there own.

Of course, it seems as if the world forgot that the template was for confiscation of savings account, which in addition to official policy and historical central bank balance sheet expansion by means of competitive currency devaluation, could be the most bullish reason for relocating money out of the system and into alternative we have actually seen in modern-day times.

Genuinely speculation about this move beyond the actual trading system is not useful.

Going back a bit closer to the concern, one may question whether the huge shorts were pressured or forced to make this move by the CFTC.

More most likely, an orchestrated like this was the only means these bullion banks can get out from under these dangerous positions. The heterogeneous longs in silver had actually been standing strong and were a real danger to triggering covering panic and an indication that the decades-long silver price manipulation could not go on forever.

Given how inadequate sentiment has actually been, and the general ignorance about exactly what is taking place from a macro-economic perspective, it is not difficult to visualize silver running through $100 extremely quickly and without producing a dollar panic. The dollar can remain "bid" given exactly what is taking place in Japan and Europe.

Naturally, the mainstream will be flashing today's graph each and every time silver goes up in any substantial , proclaiming it to be an additional bubble, just as they always have.

In the end, it is only truly ever about the physical market for these metals. Undoubtedly, the are among the last remaining markets dominated by derivative or paper, and yet based on a physical unit end point.

The majority of silver investors understand this, in addition to the truth that numerous exist for each and every above and below ground ounce of these metals.

Keywords: silver prices, price of silver, silver price

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