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Trading Antics and The Real Price of Silver
This morning, November 25, in light trading, we once again saw a millisecond smash in gold and silver futures caused by someone (or something) unleashing a highly uneconomical sale of precious metal. I say uneconomical because no one in their right mind would dump something like 150 million dollars of metals futures into the market in a matter of seconds. Think about it - if you are that big of a player trying to legitimately sell assets you own, reason dictates that you would want to scale out of that position slowly, and not dump it on the market all at once, depressing not only others' price - but your own.
Of course, it may be that the entity dumping this much gold in the futures market held some sort of other, larger bet on the short side of the market - possibly in the opaque derivatives market. So for the 100 million supposedly lost on the sale, there might have been 200 million gained by other bets on lower prices. This has been one explanation for price smashes that make no sense to many observers, and that seem to be a recurring event in recent months.
On the other hand, if you believe in the manipulation of gold and silver prices, you look at price dumps like what we saw this morning and see the hand of concerned government or central banking entities who see lower precious metals prices as a necessity, so as to maintain confidence in fiat currency.
Whether you believe that the seller this morning was somehow making money on the trade by being short elsewhere, or you believe the conspiracy theory of someone powerful "wanting" gold and silver down, you have to marvel at how much synthetic or electronic gold and silver seems to be flying around out there. In the case of silver - where there is at best 50 billion dollars of known above ground stocks of coins and bars - possibly more than a trillion dollars of "silver" trades around the world in a given year.
As you might imagine, if even a fraction of this fictitious silver were to somehow find its way into the physical market, we would easily be talking about three figure (or four figure??) silver.
I'm not making any guarantees about the future catalyst that may encourage people who simply play paper silver to buy the real thing, but by the same token you have to wonder if the present markets we accept as normal - markets that treat us to the insane levels of volatility seen this morning - will function like this forever.
If silver is ever freed from its paper price, the white metal could just be one of the best investments you ever make.