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Trading Antics and The Real Price of Silver

By: Ryan Jordan | Wednesday, November 27, 2013

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.

 

Author: Ryan Jordan

Ryan Jordan
Silver News Blog

Ryan Jordan

Ryan Jordan has been blogging about the precious metals since 2010. However, his interest in the precious metals markets spans nearly 20 years as both a coin collector and private trader. Ryan believes there is a lack of serious discussion of how undervalued precious metals like silver are, and he aims to explain the many reasons why people should take silver investing seriously without relying on hype, sensationalism, or scare-tactics. Ryan Jordan recognizes that assets like silver serve a dual function: one, as a real asset that can provide portfolio insurance as a non- correlated investment, and two, silver can appreciate significantly in a short period of time. Silver could be the best performing asset you could own, with or without a significant crash in the dollar, or other financial mishap. Ryan Jordan's articles have appeared at financialsense.com, gold-eagle.com, investing.com, jessescrossroadscafe.com, silverbearcafe.com, silverstrategies.com, wallstreetformainstreet.com and numerous other sites.

Ryan Jordan believes a historical perspective is absolutely essential for anyone trying to navigate today's financial markets. It is this unique historical perspective that he tries to work into his analysis of the silver market. Ryan received a B.A in History from the University of California- Los Angeles in 1998, a M.A. in History from Princeton University in 2001, and the Ph.D in History from Princeton University in 2004. His professional research involves the history of social movements, religion, and freedom of speech in American history. His two most recent academic books include: Slavery and the Meetinghouse: The Quakers and the Abolitionist Dilemma (1820-1865) and Church, State ,and Race: The Discourse of American Religious Liberty (1750-1900). As a peer-reviewed historian, his articles have appeared in The Journal of the Early Republic and Civil War History. Ryan has taught US history at all levels, ranging from undergraduate to graduate students, at Princeton University, Lafayette College, the University of California-San Diego, Mesa College and Palomar College. Currently he teaches at the University of San Diego and National University, in La Jolla, CA.

Copyright © 2013-2014 Ryan Jordan