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The following article was published in our article directory on June 1, 2013.
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Gold and Silver - The Inverting Bubble

Article Category: Finances

Author Name: Dr. Jeffrey Lewis

Current trading in gold and silver has actually shown the inverse of patterns consistent with a speculative craze.

Instead of retail investors purchasing into an increasing market, stable and large build-up has been noted on dips.

This was occurring long prior to the April crash in gold and silver rates. This is the toughest kind of buildup, due to the fact that it is mainly devoid of feeling.

No Concern or Greed, Just Purchasing

The emotional nature of the marketplace is uncommonly strong. No panic selling out of worry occurred. Instead, the value takedown in the paper futures market was blatant and prevalent.

No greed factor was noted, as purchasers continue to come into the physical market at the lesser rates, in spite of relatively high premiums for buying physical metals.

The gap in between fundamentals and pricing continues to expand as value investors awaken to the speculative potential of silver. Instead of illogical euphoria and prevalent participation, there was illogical anguish in the form of typically bad belief from the external looking in.

Again, those who gather at this phase are the greatest hands, made up of users and value or contrarian investors who see right through the enormous facade of the paper silver market with mainly dispassionate eyes.

These investors are a testimony to silver's tendency to continue to be a financial asset, a fact that continues to stress central bankers.

Is the CME Fueling its Own Demise?

The CME and its big commercial traders have actually been cheating the rest of the market in the name of liquidity.

In a real blowout, many of the selling happens in a craze at the bottom. The lower the rate goes, the more metal will appear as the weak hands panic. The problem with this is that the weak hands just do not have any physical to offer, as the sturdy hands stand ready to buy it up.

Some physical purchasers will unload some or every one of their holdings, however a lot of long term silver and gold investors will see the most recent selloff charade for exactly what it is: just an additional opportunity to contribute to their positions.

Every one of the reasons they purchased these metals to begin with remain to be verified. The only real risk to the fundamentals (and the scenario is most likely past the point of repair in that regard) are financial modifications that negate the need of cash printing. This is highly unlikely to occur in the present circumstance.

For the first few years of Quantitative Easing, one might perhaps have argued that the cash remained secured in the banking system. Now the huge amount of cash being developed is being spent on food stamps and so on, feeding right into the economic climate.

The result is a decoupling at the very least, in the absence of an outright currency collapse.

Maintain Two Markets

Two markets now seem to be operating, and the pricing distinction between them may eventually widen significantly. One is the paper futures market for the traders, while the other is the physical market for the individuals and retail investors.

Could this paper-physical price divergence occur without the imposition of capital controls, the prohibiting of silver and gold ownership or other forms of confiscation?

Well, it is currently taking place. The huge futures market players have actually been orchestrating the most egregious, uneconomic, selling waterfalls at will practically daily in front of everyone without any commitment to deliver physical metal, but nobody appears to care.

This has actually brought the paper futures market simply a flap of the proverbial butterfly's wings away from default and panic. Controls enforced in the middle of such a crisis would just serve to add to irritate the panic. A black market would develop immediately.

Simply think about all the investors who bought their metal with cash, or who otherwise went unnoticed. It would be a problem going after these individuals to take away their metal. The fairly little silver market would be just be $500 billion in size even at a price of $500 per ounce if silver pumped up by even more than multiple of ten.

To put this in standpoint, that vastly inflated silver market would still be far less in size than the yearly Federal spending plan deficit and is not even as huge as the big bailout from 2008.

The Key is Dealerships and Manufacturers

Producers need to want to hold back their stocks to see the rates truly begin to rally.

Miners are the last holdout, and they have greatly stayed silent about the control of their product, at the cost of their investors.

Perhaps they are bought and spent by the very banks that provide their capital accounts and financing, because it is these exact same banks that likewise profit from the continuous value suppression.
Ultimately, these huge dealers and their purported non-for-profit consumers will have to pay greater rates to cover their massive shorts.

For more posts like this, and to stay updated on the most important financial, monetary, political and market events related to silver and precious metals, check out http://www.silver-coin-investor.com

Keywords: silver and gold, gold and silver, silver prices, silver market

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