Silver starts it's climb back up.

On Friday, Silver fell as low as $33.10.

Five CME margin hikes (and other margin hikes from Brokerage houses) in 8 days did their job.  Traders speculating with borrowed money were forced out, the liquidation causing just over a 30% plunge in the paper price of Silver which allowed those holding huge short positions in Silver to cover a large number of their shorts.

But as we have said, the fundamentals that drove Silver to these heights still remain.  As the Bank of Montreal declared in an investment report in April, 2011, there is a new paradigm for Silver.

And the vast number of investors recognize this too.

As a result, the artificially manipulated collapse in paper Silver price - while temporarily successful in driving that price downward - did little to deter demand.

As we noted on the weekend, ScotiaBank quickly sold out of their Silver stock as buyers lept at the chance to buy Silver 'on sale'.

Or at least as buyers tried to buy Silver at that price.

The problem was finding it, and if you could find it... buy it at $33/ounce. Many dealers simply wouldn't sell it at that price.

Even large mining companies like Canada's First Majestic Silver, who sell bullion directly to customers, were having nothing to do with the artificial price drop.  Majestic simply refused to sell a 1 ounce Round for below $40 ($7 over the 'supposed' price of an ounce of Silver).

Not surprisingly Silver has rebounded almost 20% from Friday's low.  The spot price now sits just below $39. 

With the spot price up almost $6 from Friday morning, how much has First Majestic increased the price of their 1 ounce Round by?

50 cents.  The price is now $40.50.

They knew exactly what we had been saying... the manipulated price last week was artificial and would be coming back up.  Therefore they refused to sell their physical at such ridiculous prices.

A colleague emailed to report that he went to the Vancouver Bullion Exchange at Broadway/Granville on Monday in an attempt to buy some physical silver at fire sale prices.

They didn't have any Silver to sell. No rounds, no 100 oz bars, nothing between.

• "I was in a line up of 20 people, about the average of the office during my visit (twenty-five minutes). Interestingly, with no Silver to buy, most of the patrons were trading in US dollars to convert to Canadian dollars.  The amounts ranged from $5,000 down to $300."

Make no mistake.  The Silver commodity market will end in a bubble.  There will come a time when this blog writes about the irrationality of the market and tells you that you shouldn't be investing in it.

Most bull markets and most sectors, whether it is stocks, real estate, or whatever it happens to be, lands in a bubble.

We are far-far-far from a bubble so far.

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