For almost two weeks now, I have have told you to expect a great deal of volatility in Silver and that we would be in for a wild roller coaster ride.
- Why did you originally believe Silver was going to rise exponentially in value?
- Have those reasons changed?
- Has the US suddenly resolved their deficit woes?
- Has the US federal government found a way to avoid raising the debt ceiling of $14.3 Trillion?
- Has the U.S. government discovered spending restraint and move toward a balanced budget?
- Have the individual US States resolved their massive debt funding issues? Are California, Illinois, New York, Michigan and about 30 other states suddenly solvent and prosperous?
- Has the US found a way to fund the outstanding liabilities of Social Security, medicare, etc which bring the actual debt totals to over $70 Trillion?
- Has the massive derivative problem been solved?
- Did the too big to fail banks suddenly become solvent, their CDOs and loan portfolios truly valued at par?
- Has Europe become solvent or have Portugal, Iceland, Ireland, Greece and Spain suddenly resolved their severe debt problems?
- Is China suddenly buying US Treasuries again?
- Are the world's Central Banks buying up more US dollars or are they still dumping US dollars to buy Gold?
- Has the COMEX suddenly sourced 1 billion ounces of physical silver, tested and ready for immediate delivery (because they sold that many paper contracts on Monday)?
Wed May 4 10:50:37 2011 EST
Margin Increase: Silver Derivatives
In light of the recent unprecedented volatility in silver markets, the exchanges that offer trading in silver derivative contracts are increasing the margin requirements on these products. In an effort to adequately address the inherent risk resulting from this volatility, we are increasing margin requirements on silver derivative contracts to a level exceeding that which the exchanges are implementing.
You will be notified as more information becomes available.
Please monitor and manage your risk accordingly.
You have to keep this in perspective. No asset has risen so sharply so quickly without meaningful and necessary pauses in price to establish a new base. Even gold, during its run paused now and then to allow for normal ebbs and flows to take place, new bases to form and new launching pads to be built.
Silver didn’t do that. It shot straight up like a rocket. That rocket, thanks in large part to the CME margin hikes has now run out of fuel for a spell. Will Silver crumble? No way. The fundamentals as to why it ran haven’t changed. The reality is that it just ran too fast with everyone scrambling to try to buy physical or find a vehicle to play the game with.
This is another reason why junior mining stocks have not taken flight like the price of Silver. Rather than being a bad thing, the juniors have been a shield from the recent volatility and risk of the futures market.
Remember... the key question to ask yourself is: what has changed?
Not only has the CME hiked margins for the 4th time in 8 days, but closer inspection of their announcement (see above) reveals that there are actually TWO rate hikes in the announcement. Rate hike #4 is effective May 5th and rate hike #5 is effective May 9th.
Two concurrent margin hikes are a move never implimented before.
The paper war continues.
Click 'comments' below to contribute to this post.